The world around us
Alliander has a massive social impact because of its energy networks and activities. In this period of rapid change, it is important for us to understand which factors affect our work, both in the short and the long term, allowing us to anticipate adequately and refine our strategy if required.
Worldwide effects on society and the energy system
The energy transition in the Netherlands is not an isolated process, but takes place within the context of global trends and developments. These international influences have a far-reaching effect on society because they play a role in shaping the energy transition and the energy system that is currently being created.
International collaboration is becoming less stable
Our society increasingly faces outside interference and influence. Globally, there are military conflicts that may escalate further. Security in Europe is becoming more vulnerable and the threat level in respect of critical infrastructure is increasing, as is the importance of cybersecurity. As a result, the EU Member States are focusing more on independence and sovereignty when it comes to matters such as energy and raw materials. Opting for greater energy independence has a direct impact on the energy system: more self-generated energy leads to the need for higher investment in infrastructure. In respect of raw materials, there is a real risk of shortages of resources and materials such as cables, transformers, meters and digital grid components. This can lead to disruptions in our implementation process and adversely impact customers as a result.
Choosing greater energy independence has a direct impact on the energy system.
The effects of climate change are increasingly apparent and keeping global warming below 1.5 degrees seems unachievable
A study by the Global Carbon Project shows that global carbon emissions from fossil fuels reached a record high this year. Average global warming exceeded the 1.5 degree limit for the first time in 2024. The effects, in the form of extreme weather events, are increasingly apparent everywhere in the Netherlands. The consequence for us is that the risks to the energy network in our operating area and to Alliander's operations are increasing. We evaluate the risks to our assets and asset load limits, and take actions to prevent interruptions in the energy supply for customers.
Rapid technological developments help with the transition task
The pace of technological development is rapid in many areas. Developments in artificial intelligence (AI) are creating numerous new applications, from defence to health care and from business to science. For the climate and energy transition, developments in digitalisation offer a deeper understanding of climate models and weather patterns, and act as the basis for new applications to make the whole system smarter by allowing decentralised devices to optimise their behaviour.
Energy technology is also developing at a rapid rate. Technological advances in solar and wind energy, including more efficient panels and ever larger wind turbines, are leading to more opportunities to scale up globally. Investments in the energy transition increased by 11% globally. Electric vehicles have become mainstream due to breakthroughs in battery technology and charging infrastructure, while hydrogen is also gradually beginning to emerge as an energy storage solution and energy carrier for applications where electrification is a non-starter. Interest in nuclear power has been reawakened by innovations such as small modular reactors (SMRs). These developments are the cornerstones of a future low-carbon energy system, in which digital smart networks and decentralised optimisation will play a key role.
More challenges than climate change and nitrogen emissions
Six of the nine ‘planetary boundaries’, as defined by the Stockholm Resilience Centre, have now been exceeded due to human activity. This means that the stability and resilience of our ecosystems are seriously threatened. Multiple crisis mitigation measures converge in the spatial integration of infrastructure projects, complicating and potentially delaying the decision-making process. Examples are space for climate adaptation and water storage versus space for energy infrastructure. Delays in infrastructure construction are detrimental to our customers and the economic position of the Netherlands in relation to foreign countries.
National social developments
In the Netherlands, our customers’ policies and actions are strongly influenced by social developments in our own country.
National socio-economic developments
The Dutch economy grew by less than 1% in 2024. Global geopolitical tensions lead to high uncertainty, which in turn drives up inflation (more than 3% during all of 2024). The Dutch Central Bank and CBS Statistics Netherlands expect inflation to remain at about 3% in the coming years. The number of home completions in 2024 fell short of the planned number. The speed of new construction is too low to make up the shortfall of about 400,000 homes.
Increasing debate about the need for industrial policy
Those who believe that choices regarding industry are inevitable are becoming ever more vociferous, especially now that energy costs and network tariffs are rising. Mario Draghi's report for the European Commission calls for a new European industrial strategy based on accelerating innovation, greening and increasing competitiveness. The Netherlands Bureau for Economic Policy (CPB) advocates the importance of long-term thinking in public policy, presenting a scenario study in which the Netherlands independently pursues a very active industrial policy aimed at autonomy. All in all, there is uncertainty about the extent to which industry will establish and maintain operational sites in the Netherlands and pursue improved sustainability, with a potentially significant impact on the required infrastructure. For Alliander, these uncertainties translate into possible changes regarding when and where certain investments are needed. To continue to provide the infrastructure needed by industry in the future, we in our role as a network operator and industry must jointly plan further ahead for what is needed and where. Alliander is therefore working on a supply-driven and cluster-based approach to building infrastructure for industry, in which the availability of energy sources, infrastructure and cluster development are planned in joint consultation.
Greater focus on livelihood security
The annual costs incurred by municipalities for climate policy are set to rise from €775 million in 2025 to over €1 billion in 2030, according to research conducted by the Council for Public Administration. Fair distribution of the rising costs of the energy transition, transparent communication and leadership on difficult issues are becoming increasingly important and are crucial to retaining broad support for the necessary changes. The issue of livelihood security is becoming more important due to a sharp increase in energy bills caused by rising energy prices and network tariffs.
Decline in confidence in political and public institutions
Last year, confidence in politics was low, according to the Netherlands Institute for Social Research, mainly due to the failure to find solutions to key community and social problems. Examples include the housing shortage, livelihood security, the influx of asylum seekers and lack of shelter for them, the allowances scandal and the repairs to homes damaged by gas extraction in Groningen. Confidence in broader public institutions is also low.
Hardening of views in society
We see that concerns and misunderstandings sometimes turn into hate and aggression, also against people who work to serve society. Unfortunately, Alliander's employees are also affected by this. So we have set up an aggression help desk that provides immediate support when needed.
Political prioritisation
The government's manifesto pays close attention to implementing the energy transition, with a focus on key issues such as the electricity grid, affordability and making industry more sustainable. In line with the plans in the initial outline agreement, this government is linking the energy transition to green growth. In practice, however, we are seeing that rolling out measures to accelerate the energy transition, such as hybrid heat pumps and preventing congestion, is a key priority. With that in mind, it is good to know that the National Network Congestion Action Programme (LAN) is being continued and strengthened. However, the fact that we are not yet seeing enough serious acceleration in the flow of spatial planning processes is worrying. Negotiations about the price of land for infrastructure are taking too long. Nitrogen emissions are still a bottleneck and the Dutch Council of State ruling in December is likely to cause further delays in some of our projects. We further note that there seems to be too little scope for labour migration in the current political climate, at a time when we desperately need technical professionals to get the job done.
Developments in the energy system: progress is being made in the area of sustainability, but affordability requires attention
In 2024, the sustainable power-generating capacity installed in the Netherlands reached 7 GW for onshore wind, increased to 4.5 GW for offshore wind and rose to about 27 GW for solar energy. The number of heat pumps installed increased by 20% to 1.2 million. Home batteries became more popular, rising to some 40,000 units. Gas prices were less turbulent than in the period from 2021 to 2023. So the sector is relatively calm, despite the fact that prices do remain structurally higher than before. In the electricity domain, we are seeing the expected rapid increase in price volatility, which is partly driven by the strong growth in renewable energy. Thanks to greater availability of solar power, the price was negative more often than in previous years (the most extreme situation was an imbalance price of minus €1,500 per MWh), but we have additionally seen quite high prices. At the beginning of the winter period, for example, when the weather was cold and foggy without much wind. On 12 December 2024, the price for electricity peaked at €800 per MWh. Structurally high energy prices put pressure on energy affordability for households and businesses. That is why Alliander helps businesses and consumers with flexible energy usage solutions. This pays off in two ways: the grid is better utilised and they have greater control over their energy costs.
Congestion calls for structural solutions
Large-scale congestion on the high-voltage grid in late 2023 led to even more congestion reports in 2024. On top of this, consumers also faced scarcity. For customers, this resulted in increasing uncertainty with regard to action plans and growth prospects in the short term. Recent research by Ecorys, commissioned by the Dutch Ministry of Climate and Green Growth, and data from Netbeheer Nederland show that congestion on the low-voltage and medium-voltage grids costs between €10 billion and €40 billion a year. Those congestion costs could rise even further if congestion continues to increase in the coming years and companies invest less as a result. As a result, new businesses can only start up to a limited extent and current businesses cannot expand. One example of this could be a data centre choosing a location outside the Netherlands. This amount could increase further if businesses in the energy-intensive industry sector decide to leave. The impact this has on economic activity and employment is significant.
For consumers, congestion results in increasing uncertainty about their future plans.
Our industrial customers need heavy-duty connections to electrify their operations, requiring capacity that is often no longer available in our transformer stations. This means that we have to upgrade transformer stations or build new ones. As that is a lengthy process, companies are experiencing significant difficulty in implementing their plans at a time when they need to make their operations more sustainable, in order to meet permit requirements for example. We can only resolve this problem in a few cases by offering flexible usage solutions to a company.
We have many medium-sized businesses as customers, such as companies in the logistics, greenhouse and service industries. They cannot install charging facilities due to congestion, although those facilities are urgently needed to expand the fleet of mandatory zero-emission vehicles. This also affects smaller businesses, such as suppliers and service providers, who need zero-emission vehicles to operate in the inner cities.
Residential housing construction, which is already in crisis, is further hampered by congestion. Congestion affects large projects, meaning that people cannot move into their homes as early as they would like due to delayed delivery of the electricity connection. But it equally affects smaller projects, for example, in the form of excessive lead times for charging facilities for individual households.
These are extreme cases. In areas where we see potential for doing so, we are acting to speed up the process. We continually evaluate how the grid is loaded and then look for ways of freeing up even more capacity. We are entering into smart contracts, with flexible usage provisions, to create capacity for connecting companies.
Despite our efforts to build and roll out smart solutions as quickly as possible, congestion will probably continue for at least another decade. This shows that the current system, in which energy is available on demand 24/7, is no longer tenable. The differences between parties who are already connected to the grid and have full freedom of use and parties who are not connected are too great. We need to move structurally in the energy system to a way of using and feeding back in energy that does not stress the grid beyond its limits. All of us must make a contribution here so that everyone can participate in the system.
Scarcity on the grid at regional network operators and TenneT
The figure below shows the congestion situation on 31 December 2024.
More congestion management solutions
We have been working together with the market and customers on solutions for congestion and for improving how congestion management works. This included technical preconditions, such as a number of code amendment decisions taken by the ACM (including a revision of the congestion management rules, transmission charges, dispatchable generation and the use of reserve capacity). We can now offer new contract forms, such as the fixed-time window capacity reduction contract (CBC-T), the on-demand capacity reduction contract (CBC-A) and products for energy hubs. Thanks to those instruments, we can often fit customers in. A crucial requirement here is that customers with the ability to shift some of their energy consumption during peak hours on the grid are willing to make that flexibility available to the network operator against payment of compensation. Liander can use that flexibility – for which it pays compensation – to help other customers. Because the grid only actually operates at its physical limits for a few hours a year, a significant amount of grid capacity, which cannot be utilised right now, is available at other times.
A further important aspect is that there are now legal frameworks in place to prioritise allocating transmission capacity in congestion situations to customers who perform socially important functions. Those functions include congestion mitigation activities, security (such as the fire service, police, hospitals) and basic needs (such as drinking water, education and housing).
Structural congestion calls for structural solutions
The increase in electric solutions and the transition to renewable energy sources are greatly increasing the levels of peak demand and peak supply. This leads to greater dependence on the weather and volatility in energy prices, both in terms of usage and the supply of electrical energy. It also greatly increases the need for transmission capacity. With that in mind, we are working hard to strengthen our grids and investing heavily in digitalisation. The latter includes digitalisation of the grid as well as investments in IT systems that are needed for the flexible solutions and security. This is a case of ‘costs first and benefits later’. This is one of the reasons why the network tariffs are rising.
One important way to control energy costs is to make energy usage more flexible. By using energy when it is cheap and avoiding usage when it is expensive, costs can be reduced. Flexible solutions, such as price-controlled electric car charging, offer opportunities. These opportunities also exist, for example, for the use or non-use of electricity or gas based on price, which is possible with hybrid heat pumps and hybrid heat supply systems in commercial greenhouses and industry. The energy market is already characterised by dynamic prices that vary from hour to hour. In October 2024, Netbeheer Nederland submitted a proposal for a network tariff system with a time-dependent tariff component that would encourage small consumers to use the grid optimally, for example, by using more energy during periods of high solar power availability, and using less energy during the evening peak.
The solution mix includes more than electricity
Heat and sustainable gases are just as much part of the energy system of the future. Having the correct mix of energy carriers, such as hydrogen, with adequate infrastructures is highly important to safeguard affordability, task feasibility and reliability. During the transition phase, hybrid technologies can potentially play a key role in quickly achieving a significant reduction in carbon emissions without having a major impact on the energy grid.
In about one third of neighbourhoods, district heating networks may well be the heating solution with the lowest social cost. District heating networks are also important for exploiting geothermal energy and waste heat. Last year, virtually no funds were invested in district heating networks. It is important that our politicians quickly adopt the legislation needed and ensure guaranteed investment in district heating networks. The roll-out has not yet started, so customers still have no clarity about their options for the future. Cost-effective district heating networks are beneficial for the transition, but cannot currently be built. This remains an urgent issue. Heat pump sales have rocketed, and as more homes are equipped with electrically powered heating systems, collective heating system projects are becoming increasingly difficult to implement. In addition, due to this development, we are having to strengthen the electricity grid to a greater extent than currently planned in the neighbourhoods where we had expected a district heating network to be installed.
Shortages are chronic, focus on space, technicians and resources
Structural scarcities will have an impact on efforts to change the system to enable a sustainable future. First and foremost, due to the ageing population and growing demand for skilled workers, there are persistent staff shortages in the engineering, construction and energy sectors. This applies especially to technical and IT positions. Labour migration is one of the solutions needed to achieve our task, simply because not enough technicians are available and coming up through the education system in the Netherlands. Migration is a topic of great concern in the Netherlands. Laws and regulations currently offer little scope for exploiting the opportunities of labour migration.
Secondly, materials such as cables, pipes and transformers are not sufficiently available at the right time in order to perform all the work. Last year, for example, we experienced these shortages first hand when supplying transformer units for medium-voltage stations. Finally, there is a severe lack of physical space for expanding the grid, both above and below ground. As a result, procedures are time-consuming and completion times are long. Due to all these structural scarcities, the pace of grid expansion is subject to limitations, and is driving up costs faster than we would like.
How is Alliander responding to the trends and developments?
Trends and developments are closely monitored and translated into more focused priorities and strategic choices. We take into account various risks and uncertainties. Alliander is investing to improve its ability to quickly and quantitatively substantiate the potential impact of developments on both the demand side and on solution directions within various areas, such as better utilisation of the grid. These investments increase the quality and speed of decision-making within the fundamental scope of our chosen course.
Our strategy fleshes out how we deal with the challenges in the changing energy system and defines the task and mission we have. With our strategy, we are pursuing multiple tracks to achieve our overall ambition, which is to provide timely solutions that are compatible with an affordable and reliable energy system that facilitates economic growth, housing construction and achievement of the ambitions of both businesses and consumers.
