<b>Unprecedented growth of renewable energy</b> puts pressure on grid capacity

Unprecedented growth of renewable energy puts pressure on grid capacity

04 March 2021

In addition to upgrading the grid, more efficient utilisation of it is necessary to achieve an affordable energy transition.

Enexis Netbeheer realised a work package of € 882 million in 2020 (2019: € 804 million). In view of the current pace of the energy transition, this amount will only increase in the future. Due to the huge increase in solar and wind energy projects, the pressure on our grid is growing to such an extent that extra investments alone are not enough. In order to realise a timely and affordable energy transition, it is necessary to use the grid more efficiently. This is what Enexis Groep advocates for in its Annual Report 2020.

The increase in renewable energy generation is unprecedented. The total installed sustainable capacity in Enexis Netbeheer's service area amounted to 6,600 MW in 2020. This is nearly 60% more than in 2019 and illustrates the quick pace of the energy transition. With this installed capacity, the amount of electricity produced annually is proportional to the amount consumed by all 2.8 million households in our service area, which is only a portion of the total electricity consumption in our area. It is becoming clear that in increasingly more areas, the current electricity grid cannot keep up with this growth. In the past year, the capacity scarcity further increased across our entire service area. Unfortunately, this trend is continuing despite greater investments. New customer initiatives can generally be realised faster than the necessary grid expansions to accommodate these initiatives.

Not only investing more, but also smarter

Evert den Boer, CEO Enexis Groep: “By taking strict corona measures, we were able to safely continue our work in 2020, after a short interruption. This was made possible by the flexibility, commitment and solidarity of our employees and the contractors that we work with. They deserve a big compliment. We are doing everything we can to connect renewable energy initiatives as quickly as possible. The work package is bigger than ever and will only increase further in the coming years. However, there are limitations to what you can expect from the existing infrastructure. Unrestricted investing in expanding the grids is not only a practical challenge, it also creates unnecessarily high costs for society. Therefore, we first advocate for using the electricity grid more efficiently. For example, by planning the large-scale generation of renewable energy close to high-volume consumers of electricity. Or by looking into other possibilities such as curtailing the peak production of wind and solar farms. We are also investigating the application of 'congestion management', where the aim is to improve the balance between the production and consumption of sustainably generated electricity in a region, thereby relieving the burden on the network. Finally, we are working to develop a new tariff system that stimulates more efficient energy consumption.”

In addition, Enexis Netbeheer seeks to actively work together with municipalities to make investments in a very targeted way. In order to maximise use of our realisation capability, we do not wait for a specific project before we start investing. In consultation with municipalities, provinces and in accordance with the Regional Energy Strategies, we are creating extra capacity in the grid for new renewable energy generators.

Stronger coordinating role for the Dutch government

Enexis Groep also advocates for the Dutch government to take a stronger coordinating role. Regional Energy Strategies have a large impact on the energy grid. In addition, plans for home construction, sustainable industry and mobility have impacts on the energy grid. The work that has to be carried out on our infrastructure as a result is so extensive that it simply cannot all be carried out at the same time. However, a grid operator cannot and may not set priorities itself - we currently connect on a non-discriminatory 'first-come, first-served’ basis. On this matter, Enexis Groep looks to the Dutch government. Choices have to be made in the energy transition: in the Netherlands, do we wish to first connect new homes to the electricity grid, or upgrading solar panel connections? Are we going to upgrade the grid for industry’s use, or for renewable generation? We advocate for an assessment framework that substantiates the priorities within the work package of grid operators.

Financial foundation for the realisation of the energy transition

Our net profit for 2020 amounted to € 108 million (2019: € 210 million). This decrease is mainly attributable to a € 63 million increase in the TenneT transmission costs and a € 42 million increase of the deferred tax provision. The latter was due to the reversal of an announced decrease in the corporate income tax rate as of 2021. Meanwhile, net revenue rose to € 1,516 million (2019: €1,491 million). The corona crisis did not have a material impact on Enexis's financial result in 2020.

Enexis Holding’s current credit rating is A+ according to Standard & Poor's and is an Aa3 at Moody's. Solid credit ratings are very important to being able to continue to finance necessary investments in the future. To this end, Enexis Holding has obtained a convertible hybrid loan of € 500 million from its shareholders. In addition, an inaugural green bond was issued in June 2020 also for an amount of € 500 million with a term to maturity of June 2032. Both instruments strengthen Enexis's financing structure and contribute to maintaining a strong credit rating. This enables us to continue to contribute to the realisation of the energy transition.