Letter from the CEO
It is just over two years since most of the world’s countries signed the historic Paris Climate Agreement. We are now on the brink of a new energy era, requiring a fundamentally redesigned system. TenneT is well positioned at the centre of this technical, industrial and societal change.
“Europe is on a fast track from fossil fuels to renewable energy sources. As the first European cross-border transmission system operator, we need to think carefully about how we can facilitate this and build a masterplan for a secure and stable energy market.”
Society’s demand for sustainably generated electricity is enormous. So is the potential for the wind, solar and bio mass energy sources used to produce it. Fortunately, as the market matures, the costs of these renewable energy sources, especially solar and wind, is declining sharply. Now is the time to forge ahead, bringing together rising demand and increasingly affordable supply. As an electricity grid operator, we are thinking carefully about how we can accommodate this change in our system, and create a masterplan that sustains a secure and stable market for the future.
We need a new plan because for decades society has relied on the same relatively less complex and linear system: transporting electricity from where it is generated – in a fossil fuel-powered plant – to where it is consumed. Now, in the world of renewable energy, electricity can be generated from many sources at countless locations. These range from wind turbines on the North Sea to solar panels on the roofs of home energy ‘prosumers’, who now increasingly take part in the grid. In addition, there are increasing possibilities to store electricity in home batteries and those of electric vehicles.
Connecting all these power sources to the grid, bundling the electricity and transporting it reliably across land and sea, involves fundamentally different challenges and skills, and requires such things as new -high- capacity power lines, constructed over long distances. That means we need to invest more than ever in the expansion of our grid, both onshore and offshore, while coming up with ever-more ingenious ways to transport electricity with minimum disrupt to the environment and local communities.
New economic reality
As well as a paradigm shift on the technical front, today’s new energy landscape demands new economic thinking. We are moving from the old model, where supply and demand are solely driven by price, to one where natural forces dictate electricity supply. Although we might like to, we can’t control the weather. Since it’s never equally windy or sunny in all places at the same time, we need more and smarter infrastructure to ensure we can store large amounts of energy and connect locations where production is abundant with those where electricity supply is scarce.
To contribute to this change, TenneT expects to invest approximately EUR 28 billion over the next 10 years in onshore and offshore grid infrastructure across the Netherlands and Germany. This grid expansion will ensure a reliable supply of renewable energy throughout Europe in general and in TenneT’s service areas in particular. Important projects include SuedLink, the North-South connection in Germany, and the construction of new offshore connections in the Dutch North Sea.
In all cases, we carefully consider how and where to invest. In decades to come, it’s important that we can look back and feel satisfied that we made smart and efficient investments, and avoided projects that were of relatively little benefit to society. These smart decisions are not just about building grid connections to large wind and solar farms: they're about being able to transport vast quantities of energy produced to consumers of electricity in an integrated, cross-border system.
Security of supply
Autonomous, local systems will not be able to deliver the near-perfect availability on which society relies and to which TenneT is committed. Guided by our mission, we work tirelessly to ensure a reliable, uninterrupted electricity supply now and in the future. The rare and regrettable instances when outages do occur, such as the January 2017 incident at our Hemweg 150 kV substation in Amsterdam, show just how important our role is.
While renewable energy sources have really just started to take off, TenneT has already built up considerable experience of connecting offshore wind, being a frontrunner compared to other TSOs in Europe. Ten years ago, we started connecting offshore wind farms to the onshore grid and during this complex and challenging journey we have gained valuable knowledge and expertise that we can use for new grid connections, both in the Netherlands and in Germany.
To realise our long-term vision for the large-scale generation of wind energy in the North Sea, we created a 5-party consortium that includes: TenneT Netherlands, TenneT Germany, Energinet.dk, Gasunie and the Port of Rotterdam. Its purpose is to accelerate the development of the North Sea Wind Power Hub – a European renewable electricity system to be built in a central location in the North Sea. The scale and vision of this hub is unprecedented and clearly demonstrates the potential of the North Sea as a sustainable source of wind power for Europe.
The further integration of the north-west European electricity markets and therefore closer collaboration among TSOs and governments will help facilitate the transition to a more sustainable electricity supply system. This will also enable us to cope better with larger amounts of weather-dependent wind and solar energy.
Integration makes sense because no single country can effectively achieve the shift to renewable energy on its own. Electrons don’t recognise geographical borders, so there is little sense in thinking on a national scale. What is needed is a cross-border regional vision with a harmonised system of support and regulation. We are grateful the governments of the Netherlands and Germany are taking this line, and we advise other national governments to follow suit.
To serve society in this challenging energy future, we need smart, innovative systems that efficiently match demand for electricity with fluctuating supply. This calls for intelligent software solutions. Last year, we joined forces with Sonnen, Vandebron and IBM to develop a blockchain solution to manage the balance between electricity supply and demand in the Netherlands and Germany, 24/7. This innovative technology is the next step in enabling decentralised flexible energy sources to play a role in the increasingly data-driven balancing management of the electricity grid.
Safety – for customers, employees, and contractors – is always a priority, for everyone at TenneT. We were deeply saddened by three fatal accidents related to our activities in 2017. As we strive to prevent such tragedies, we will further improve our safety leadership and continue to work to raise safety awareness among all our managers and staff, whether directly employed by us or not.
Finally, one of the reasons we are able and trusted to be at the centre of the energy transition is our strong historic performance over the years. I wish to express my sincere gratitude to all our employees for everything they achieved in 2017. It is thanks to their commitment and tireless work that TenneT can provide a secure and reliable supply of electricity, today and in the future, 24/7.
Fittingly, as we enter this new energy era, 2018 marks TenneT’s 20th anniversary. This is an opportunity to celebrate the spectacular growth and reliability we have seen over the past two decades. The 20th anniversary year of TenneT also is a good moment to step down as CEO and, after 16 years, to pass on the helm to a new leader. It has been, and it still is, a privilege and pleasure to work for TenneT.
TenneT has a great future ahead, facing challenges in the further integration of the European electricity markets, the ongoing digitization of the electricity system and the expansion of the infrastructure needed to cope with the vast amounts of sustainable electricity. The Supervisory Board has started the search for a successor and I will remain in my role until this process has been completed in order to secure a smooth transition.
CEO and Chair of the Executive Board