Letter from the Board
The publication of our annual report comes at a time of great uncertainty in the world due to developments in Ukraine. Apart from the consequences this may have for the European energy system, the war in Ukraine has a big impact on all of us, also on an individual level. We sympathise deeply with all those affected by the imposed violence.
Responsible Growth
2021 was what one might call a stop-and-go year for TenneT; exciting, surprising, strenuous, challenging and with several twists and turns. Navigating the COVID-19 pandemic required constant adjustment, while at the same time TenneT needed to work at full capacity to meet the demands of a dynamic and fast-growing sustainable energy system. Whatever the external circumstances, TenneT remained steadfast in our mission: keeping the lights on, today and in the future.
The Dutch and German governments have set ever more ambitious CO2 reduction targets, requiring a steep increase in renewable energy. With grids being the backbone of the energy transition, TenneT needs to take the next leap in its growth agenda and corresponding transformative priorities. TenneT stepped up these efforts in 2021, as we work towards our goal of realising a green, integrated onshore and offshore grid for a zero CO2 economy. Like a tree with strong roots, TenneT aims to build a system that is prepared for and can deal with the fluctuating supply of weather-dependent energy sources that change with the seasons.
To achieve this, TenneT is following a policy of responsible growth. Just as a tree or a forest is a vital part of the ecosystem, so TenneT’s work is crucial for the energy system. Both flourish when they are firmly grounded on solid foundations. They need to stay connected with their roots and to be strong but also flexible, with branches that can bend but not break. TenneT has grown substantially in the past years, accelerating the energy transition and moving out of its comfort zone. But where comfort zones end, growth starts. And because growth and comfort do not co-exist easily, we need to innovate and collaborate in order to stay successful.
Growing safely
Safety is a top priority for us, and we are committed to ensuring our work is executed safely and with limited incidents. However, during 2021, three fatalities occurred among our contractors’ employees while working on our projects. The loss of these colleagues deeply saddens us, and our sympathy goes out to their families. These tragic accidents re-emphasise the many risks associated with our daily work and further strengthen our belief that every safety incident is one too many. We strive for zero harm and want all our employees, and all the employees of our contractors, to come home safely, every day. To further embed a stringent safety culture at TenneT and maintain this focus for years to come, we introduced additional safety measures and rules during 2021 and also launched a new leadership programme, Safety needs our energy.
Green accelerators
Our strategy is rock solid. Based on the four pillars of energising our people and organisation, securing supply today and tomorrow, driving the energy transition and safeguarding our financial health, we believe we are well on track to connect everyone with a brighter energy future. The strategy underlines the importance of working collaboratively with partners across the European energy system and recognises that there are three accelerating external developments that affect TenneT at its core.
First, external expectations are rapidly increasing. The ambitious climate policy goals for fast decarbonisation have increased the pace of the energy transition. In short: this could implicate that we need to accomplish twice as much in half the time.
Second, the energy system is getting more complex, volatile and interdependent and with more renewable energy being fed into the grid, often in remote locations, planning and steering the system becomes more dynamic every day. Despite these challenges, our grid is still expected to meet a hard availability target of 99.99%.
Lastly, TenneT – along with other players in the energy system – faces increasing competition for people and materials. The energy transition requires the deployment of tens of thousands of new talents as well as a huge demand for raw materials, components and finished goods.
Choices for a feasible path
To double our output towards an annual investment level of at least EUR 6 billion by 2025 will require us to grow towards 10,000 employees. Annual investments could further rise if planning and approval periods are shortened and supply chain delivery and talent hires can be ensured.
We are convinced this quantum leap can only succeed if we make responsible choices, for ourselves and for the people and industries we serve. That means building an organisation that is firmly rooted and well-grounded in society and is structured with the right delivery capabilities. With this approach, we can ensure a stable and secure supply of electricity in a system that will largely rely on weatherdependent energy sources. We are pleased that we were able to achieve a very high grid availability of 99.99999% in 2021.
We are convinced that responsible growth must be the guiding principle for TenneT and all stakeholders in our value chain. By making the right choices, TenneT will embark on an ambitious and feasible pathway so that we - together with partners, suppliers, policy-makers and colleagues - can build, maintain and operate a high-voltage electricity grid that supports a green energy future.
Together responsible for green growth
As CO2 reduction targets become more ambitious, we must ensure that the electricity system can facilitate these developments. To achieve this, TenneT requires streamlined and modern planning and approval procedures, as well as political support for grid reinforcements and expansion at all levels. It is encouraging to see that the newly formed governments in Germany and the Netherlands are paying attention to this in their coalition agreements. Furthermore, we also need the right legislative and regulatory environment to transform the energy system: forward-looking regulation fostering innovation is instrumental to speed up progress. Market parties are waiting for frameworks that encourage them to invest heavily in renewables, flexible electricity supply and demand and other grid innovations.
Collaboration and collective responsibility will determine the success of the energy transition. TenneT may be an important link in the system, but sustainable growth, green jobs and investments in innovations will only be achieved together with our stakeholders, alongside European and national political decision-making and regulations. We are committed to advising our partners and stakeholders on technology and the systemic impact of the energy transition, on market integration and security of supply.
Proud of our sustainable progress
We are proud of our contributions to green growth in 2021. Never has TenneT invested so much in the expansion and maintenance of its grids. We were able to enlarge the onshore grid with 118 kilometres of high-voltage connections in close collaboration with our suppliers and contractors. Offshore, we realised 623 kilometres of new connections and introduced impactful innovations to transport electricity to the shore faster and on a larger scale. Together with our suppliers, we are planning and developing offshore grid connection systems, each with a capacity of 2 gigawatts (GW). This is more than two or three times the size of our existing systems in Germany and the Netherlands, enabling the supply of electricity to the equivalent of two million households. We expect to build at least six of these 2 GW connections by 2030, three in Germany and three in the Netherlands.
We are already delivering critical projects to drive the energy transition in Europe. For example, commercial operations of our NordLink cable began in 2021, connecting Germany and Norway through a 623-kilometre subsea cable. When electricity prices in Germany are high, because of little wind or sun, consumers could profit from lower-priced hydroelectric power from Norway. This ‘green link’ can supply more than 3.6 million German households with renewable energy.
Green and sustainable financing
Our large-scale investment programme requires broad, sustainable and timely access to financing with a good balance between equity and debt to maintain our solid credit ratings. To that end, we are very pleased that the Dutch government announced to contribute EUR 4.25 billion of equity capital for our activities in the Netherlands. For TenneT’s equity capital requirements in Germany the options are still being explored. TenneT is confident that a solution will be reached in 2022 in coordination with its shareholder, the Ministry of Finance. The (social) benefits of TenneT as an integrated cross-border company are central to finding a solution.
During 2021, access to the debt financing markets remained exceptionally good. Last May, TenneT issued its largest ever (EUR 1.8 billion) and first green triple tranche Euro bond transaction, reinforcing TenneT's top-3 status as corporate issuer of sustainable, green debt financing in Europe, with currently around EUR 13 billion of green debt issued across different debt formats.
Thank you!
Our great appreciation goes to all our colleagues who gave their all in this extraordinary year. We will need them and many new colleagues in the coming years to build, maintain and operate a secure, affordable and sustainable high voltage electricity grid. 2021 was also the last year in TenneT for our Chief Financial Officer, Otto Jager. Throughout his career at TenneT, Otto not only ensured we remained a financially robust and stable company, but he was also a driving force behind the professionalisation and cultural transformation of the company, through his responsibility for our People agenda. We warmly welcome Arina Freitag as his successor as CFO, who will be vital in leading TenneT into the coming decade of record investments for the energy transition in Germany, the Netherlands and Europe.
