Integrated Annual Report 2023

Executive Board (fltr): Tim Meyerjürgens, Chief Operating Officer - Manon van Beek, Chief Executive Officer, Arina Freitag, Chief Financial Officer - Maarten Abbenhuis, Chief Operating Officer

Energising today and tomorrow

The year 2023 has shown us that international, societal, economic and political stability is under pressure. Running an organisation in ambiguous times is the new normal. The war in Ukraine, the Israeli-Palestinian conflict, the economic downturns and rising cost of living created widespread uncertainty. For TenneT, as we strive to create a reliable carbon-neutral energy system in 2045, it proved to be a year with many  dimensions. It is clear that the roadmap towards sustainable prosperity is not linear nor clearly signposted. However, it’s a journey TenneT is prepared for and, although there’s a need for realism, we have concrete plans based on a vision of the energy system in 2045 for the required grid expansion in Germany and the  Netherlands. Focus on execution is key to achieve national and European climate goals.

Reliable, affordable and sustainable

As we work towards these targets, TenneT continued to fulfil its responsibility for grid availability, reaching 99.99993% in 2023. Looking at 2024 and beyond, a supply-secure and independent electricity system that is affordable, reliable and sustainable, remains the ultimate balance to achieve. This requires strong leadership, a collaborative mindset and a consistent energy policy that enables the whole energy sector to grow and make the needed investments. Affordability, as part of the energy trilemma, is gaining importance and center of the societal debate on energy transition. TenneT also attaches great importance to the affordability of the future energy system, which translates, for example, into forward-looking and smart strategies such as Target Grid that allows a programmatic approach, standards and more efficiencies in the expansion of the grid.

Safety needs our energy

Especially in these times of steeply growing investments, working safely and always feeling safe to address colleagues and partners and to be addressed on safety are paramount company values. Safe operations and safety for the environment in which we work, and all stakeholders involved in our many projects are number one at TenneT. Realising the necessary expansions to our grids as soon as possible can never compromise safety. Although we have made good strides in 2023, safety continues to require 100 percent attention. TenneT's Total Recordable Incident Rate (TRIR) is stagnating and does not match our ambition of achieving 'Zero Harm' among all our employees and all our contractors and subcontractors. Our clear life-saving rules were too often violated, leading to high-risk incidents. Since our efforts are aimed at achieving a situation where people always adhere to the Life-Saving Rules, we will put more emphasis on better and faster root cause analyses to learn and improve from reported violations of the Life-Saving Rules.

Our vision in action

To achieve an electricity grid that enables a reliable climate-neutral energy system in 2045, we need to work, think and act differently. The task before us is feasible, but it will not be achieved by working in the same way as we have done before, by identifying short-term bottle necks in the system and solving them step by step or project by project. Our Target Grid 2045 strategy, which TenneT launched in April 2023, gives us a clear, common goal: an electricity grid that must be ready by 2045 for an energy secure and independent electricity system. Based on internationally agreed scenario’s and using a back-casting approach we already know most of what must happen. It also allows us to start the crucial preparations now – there’s no time to lose. In line with wider European politicy plans, Target Grid envisages the North Sea as the primary source of energy using offshore wind as the green powerhouse for the Netherlands, Germany and other European countries.

One of the key innovations needed to realise this offshore energy ambition is hybrid interconnection. Together, these interconnectors form a meshed high voltage direct current (HVDC) infrastructure that can connect offshore wind farms to energy markets in multiple countries. This approach will strengthen security of supply and European energy independence, and make the future energy system more resilient, efficient and affordable. TenneT’s world-first 2GW standard for HVDC offshore connections is a crucial innovation that enables this, allowing larger wind farms to be connected to the grid with fewer platforms.

The first 2GW platforms to be installed in the period until 2031 will be hybrid ready: this means that they are already designed as a hub to be connected to the meshed offshore HVDC grid of the future. Target Grid and our 2GW Program are examples of exponential, unconventional, future-ready thinking. This is a shift from linear to non-linear thinking, planning and developing, which no longer fits the huge task that we, together with society, need to accomplish. Our next challenge and task is to standardise this way of thinking and working in everything we do.

Focus on executing our projects

We invested EUR 7.7 billion in 2023 and this was more than we planned for, mainly due to investments regarding the 2GW Program. Our focus on our promise to speed up our construction pipeline, on land and at sea, is bearing fruit, with significant progress in 2023. After years of preparations in Germany, we started constructing the two crucial north-south HVDC corridors, SuedLink and SuedOstLink – each over five hundreds of kilometres long. During the year, we also completed the 140 kilometre long Westküstenleitung, the 61 kilometre long high-voltage connection Ganderkesee - St. Hülfe and, in the Netherlands, we completed a 40 kilometre electricity highway between Eemshaven and Groningen. Our work is also accelerating offshore. TenneT completed new grid connection systems for large offshore wind farms, Hollandse Kust (noord) and Hollandse Kust (west Alpha) (both 700 MW) and DolWin6 (900 MW). Research into the feasibility of two new submarine interconnectors, one between the Netherlands and the United Kingdom (LionLink), and the other from Germany to Norway, were announced. These interconnections are particularly significant as they will have a hybrid function, connected to offshore wind farms along the way. This is the tangible start of a European HVDC grid, part of Target Grid.

The hugely accelerated electrification of society is a positive sign of the energy transition, but it also leads to long waiting times to be connected, especially at our regional 110-150 kV grids in the Netherlands. Unfortunately, this will remain a critical situation for the time being. Through the National Grid Congestion Action Plan (LAN), grid operators and government are working closely together to solve grid congestion through a combination of faster permitting and construction, better utilisation of existing infrastructure and by relying on parties to make contracted flexibility available to others.

Due to persistent numerous bottlenecks in the German onshore electricity grid, power from large wind farms in the North Sea must increasingly be scaled back. More speed is therefore needed to expand the electricity grid, for example by building electricity highways.

Looking ahead the European energy transition is unfolding at pace. We anticipate our investments to add up to approximately EUR 160 billion in the coming ten years and will reach at least EUR 10 billion in 2024. For the period until 2045, TenneT plans to construct over 4,800 kilometres of new grid connections on land and at sea in Germany, and 2,500 kilometres in the Netherlands. This requires hundreds of new transformers and dozens of new high-voltage substations. As we build an integrated offshore grid, our current onshore grid will also expand significantly. Space to develop energy infrastructure should be reserved by regional and national governments as soon as possible. Offshore wind is a key electricity source in Europe’s decarbonisation plans. The first Offshore Network Development Plan in the North Seas envisages 320 GW of installed wind power by 2050 in the North Seas Energy Cooperation (NSEC) countries and host country, the United Kingdom. TenneT's share of this is envisaged at approximately 70 GW in the Netherlands and roughly between 30 and 40 GW in Germany. TenneT alone is committed to connecting over 40 GW of offshore wind in the Netherlands and Germany.

Working together by definition

The unprecedented long-term framework agreements that TenneT signed with key suppliers in 2023 to develop HVDC infrastructure are a prime example of intense and far-reaching cooperation. These agreements entail grid connection systems (cables, converter stations) for our offshore 2GW Program, and power transformers and compensation coils to build and modernise substations on land. With these agreements worth tens of billions of euros, new economies of scale and technical standardisations can be achieved.

These are also examples of exponential, unconventional thinking and acting. With these, TenneT secures capacity with suppliers and ensures timely delivery of crucial components. The framework contracts provide our suppliers with the certainty and predictability they need to invest in the additional resources needed. This long-term certainty is also critical for TenneT, as we compete in an energy market tightened by a shortage of suppliers, talent and resources.

Close to society and our people

To achieve the energy transition, we want to take all stakeholders with us on this journey: governments on various levels, suppliers, NGO’s, industries and all citizens. This year more than ever before we have noticed that citizens are mostly supportive of the need for climate action, but when TenneT becomes active in their local area, we encounter more resistance. Of course, we understand that our large projects can have a significant impact on the living environment. But we also cannot escape the reality that we need to expand our electricity grids to maintain security of supply and facilitate sustainable growth for society. We face increasing negotiations with provinces, local residents and time-consuming legal procedures.

This also presents a task for TenneT. To improve mutual understanding, ensure timely decision-making and create support for our work, we have significantly increased our communication and cooperation efforts with local and regional stakeholders. In 2023, we held well over 1,000 meetings with our stakeholders.

Our great thanks go to all our stakeholders for working together in 2023: very good and open cooperation where possible, critical where necessary and always with the energy transition in sight. Our firm belief that we will only get there, if we all get there is starting to gain traction. We wholeheartedly thank all our partners and our 8,336 internal and external employees of more than 70 different nationalities for their courage, connection and ownership that led to our achievements in 2023 that we can be proud of. They really energise today and tomorrow and work tirelessly to maximise the utilisation of our existing assets, increase our grid capacity and develop a reliable climate-neutral energy system by 2045 that supports a prosperous future for people and businesses.

A wholehearted thank you!

On behalf of TenneT's Executive Board, Manon van Beek (CEO)