Trends and developments
2022 was marked by major global developments that had a deep impact on society, the energy transition and the energy system. This inevitably had an effect on the work Alliander does. Having a good understanding of the factors that impact our work – in both the short and long term – is crucial. This section describes the most significant trends and developments that we use to refine our strategy, as described briefly in the next section.
Trend 1: The global energy market has become more unpredictable
The Russian invasion of Ukraine has significantly changed the geopolitical situation. Russia, a major exporter of gas, has gradually been cutting off the gas supply. The disruption to the important gas pipelines Nord Stream 1 and 2 was regularly in the news. Because sufficient gas supplies were no longer guaranteed, an early warning of a gas crisis in the Netherlands was issued in the summer.
The gas price, and as a result the price of electricity, rose to unprecedented levels due to the situation in Ukraine. In addition, the supply of electricity in Europe this summer did not come from the usual producers because there were problems with nuclear power plants in various places. As a result, the price of electricity rose even higher.
The consequences for the Netherlands were clearly visible. Over one million households were at risk of running into financial problems due to the rapidly rising energy prices in 2022. The Dutch government therefore issued energy rebates in November and December and worked on introducing a price cap from 1 January 2023. In this scheme, households and other low-volume consumers pay a maximum price up to a certain amount of energy, which in most cases means their energy bill will be lower.
These developments have led to a twofold picture in the Netherlands: on the one hand the risk of energy poverty has sharply increased, while on the other, people are seizing the opportunity provided by these developments to invest substantially in making their homes or businesses more sustainable, as described in trend 2, and to think more about how they use energy.
Trend 2: Explosive increase in demand for electricity
The effort to make the Netherlands more sustainable is leading to the further electrification of the supply and demand of energy and hence greater demand for network capacity and new connections. The Netherlands has risen rapidly up the European ranking when it comes to generating renewable energy. The significant rise in energy prices and limited availability of alternatives, such as hydrogen, green gas and district heating networks, led to a further acceleration in this electrification in the past year.
Huge increase in industrial e-boilers and large batteries
We find industry is showing increased interest in e-boilers. At the same time, there are companies that prefer to operate on sustainable gases. We see a dilemma emerging: companies differ in the timing of their switch and desirable alternatives are not yet available. The impact of this became more visible last year and was particularly conspicuous in the congestion problems in Limburg, where more than 1 GW of battery power was requested in a short space of time. This trend is now visible all over the country, causing the high-voltage and medium-voltage networks to fill to capacity more quickly. It is one of the most important issues for the coming years: how do we organise things to ensure that infrastructure modifications and sustainability efforts are synchronised such that climate targets can be met?
Despite the enormous increase in the demand for power, the use of batteries is a positive development. Batteries are a key source of flexibility in the energy system. In theory, they can play a part in solving network congestion. In practice however, we see that large-scale batteries actually lead to additional congestion in many places in the electricity network. Our opinion is that batteries should not unnecessarily overburden the network. This means we need to develop solutions for batteries that do not overload the network, or even remove some of the load, or alternatively that we look for places for batteries where there is plenty of capacity on the network.
More electric cars
The number of electric cars will increase to about 1.6 million by 2030. The Dutch Minister for Climate and Energy Policy, Rob Jetten, announced in 2022 that he wanted a faster switch to electric vehicles, including for drivers of lease cars. We are already seeing an enormous increase in the number of charging points, but tens of thousands of additional connections will be needed for public charging points in the coming years to build the charging infrastructure needed – not just for electric cars, but also for buses, logistics services and shipping. Based on scenario analyses, we expect an additional demand for electricity from our stations of approximately 900 MW by 2030. Our advice is to make smart charging compulsory in the Netherlands and we are preparing for this. We ran a trial with flexible charging speeds at public charging points for electric cars as part of our Flexpower3programme. We will scale this up further in the coming years.
Homes are becoming more sustainable, mainly through heat pumps
Consumers are increasingly choosing to insulate their homes and install solar panels and heat pumps as ways of reducing their energy bills. We are seeing a rapid rise in consumer interest in heat pumps. Of the 1.3 million heat pumps in the Netherlands, 70% are in homes. The number of heat pumps in homes has increased by about 50% per year in the past two years.
Trend 3: Energy transition under pressure due to shortage of staff, space and materials
The number of job vacancies is rising and labour shortages are increasing substantially. It is a challenge for organisations in the energy sector to find staff to do all the work needed for the energy transition. At least 13,000 additional technicians will be needed in the energy sector in the next four years, with Alliander, its contractors and its supply chain partners requiring over 2,500 technicians. At the same time, there are staff shortages in the residential construction sector and in industry. In total, the Netherlands is estimated to have a shortfall of 60,000 technicians. Too few young people are choosing to train as technicians or to apply for a job in the technical sector. The consequences of this are visible throughout the sector.
At the beginning of November 2022, five technical sectors joined VNO-NCW and MKB Nederland in presenting a action plan. This has put the acute shortage of technicians firmly on the political and public agenda. The plan presents a broad package of measures covering the recruitment, training and retention of talented individuals.
Lack of space
As the sustainability process speeds up, realisation is growing that the necessary infrastructure is not always easy to fit into the available public space. Energy will be a key factor in determining spatial planning in the Netherlands in the coming decade, but there is a lack of space both above and below ground in the Netherlands and public support for major infrastructure projects is limited. The underground and aboveground space we require will therefore need to be made available more quickly and with more certainty. This requires, among other things, significantly faster spatial planning procedures for construction and utility-related work. Furthermore, some important projects are currently being delayed due to the nitrogen issue and the revocation of the exemption granted to the construction industry.
Shortage of materials
Geopolitical developments in recent years have made it clear than international supply chains are vulnerable to interruptions. Shortages of raw materials, the imposition of lockdowns and sanctions have made the availability and transport of such items as cables, meters and transformers more difficult. In addition, many production lines are currently running at their maximum capacity. Furthermore, the long-term outlook for the world's reserves of raw materials such as iridium and cobalt will make it harder to meet the global climate objectives.
Impact on Alliander
The above-mentioned trends have far-reaching implications for Alliander. These developments have increased the pressure to speed up the transition to renewable energy generation. Further acceleration is needed in terms of modifying the physical and digital infrastructure. At the same time, this is made more difficult by the increasing scarcity of staff, such as technicians and data specialists, and of materials and public space, both above and below ground.
How is Alliander responding to these trends and developments?
We are an organisation that serves the public. Everything that happens in society has a direct impact on our work. The trends, developments and issues in the world around us affect our strategy, which we have refined accordingly. Our strategy describes how we as a company deal with the challenges of the changing energy system. The current acceleration puts increased pressure on the organisation, and waiting times for connections have increased. Alliander’s strategy is therefore to take a multi-track approach, as explained in the following section.