Executive Board (fltr): Tim Meyerjürgens, Chief Operating Officer - Manon van Beek, Chief Executive Officer, Arina Freitag, Chief Financial Officer - Maarten Abbenhuis, Chief Operating Officer
As this IAR reflects the year 2022 it reports on the activities of one integrated TenneT.
Over the past year, both the short and long-term challenges facing the energy system forced us to perform like a sprinter and marathon runner at the same time. More than ever, we are responsible for enabling a carbon-free energy system several decades from now, while in the short term our grids need to maintain security of supply on a highly volatile energy market. In 2022, together with other European TSOs and governments, we kept the electricity supply secure during the energy crisis. Our high voltage grids showed a 99.9996% availability. This made them indispensable for society and they remained a strong foundation for our economy.
Alongside our solid grid availability, TenneT in 2022 remained committed to the design, maintenance and operation of the high-voltage grids. For example, we introduced a new generation of grid connection systems, the so-called 2GW offshore programme, which sets a new standard in the industry and will allow the entire offshore chain for wind energy to benefit from more than double the capacity of existing grid connection systems in an environmentally friendly manner. We realised two new offshore grid connection systems for wind energy with a total capacity of 1,400 MW, Hollandse Kust Zuid alpha and beta. And we completed the topside installation of DolWin6 (900 MW) and Hollandse Kust Noord (700 MW). These latter two projects are planned to go in service in 2023.
On land, TenneT delivered 320 kilometres of new high-voltage power lines and 6 new high voltage substations. Furthermore, we strongly scaled up our maintenance activities by, among other things, replacing and modernising dozens of high-voltage substations. We are also pleased that, together with the 38 European TSOs, we were able to support the Ukrainian electricity system by synchronising both the Ukrainian and Moldovan high-voltage grids with the European system. Due to the still volatile situation in energy markets, this year's annual analyses in Germany and the Netherlands to assess the readiness to secure electricity supply for the winter period were performed with extra intensity. On behalf of the German Federal Ministry for Economic Affairs and Climate Action, TenneT - together with the three other German TSOs – conducted a special analysis on the security of supply of the power grids, the so-called 'stress test'. The TSOs put forward a number of proposals aimed at ensuring security of electricity supply. These proposals were adopted and implemented by the German government. In the Netherlands the analysis showed a reassuring picture in terms of security of electricity supply.
Despite our endeavours to always ensure highest standards of safety, we were deeply saddened in 2022 by the fatalities of a TenneT colleague and an employee of one of our contractors, while they were working on construction projects in Germany. We sympathise deeply with the bereaved families and are more determined than ever to put even more emphasis on life saving rules and zero harm practices, to ensure the safest possible working environment. We started Safety Tops, dialogues with the top management of all our (sub)contractors to look together at how to ensure safety on all our projects and for all our people and partners. Zero Harm, in addition to all processes and measures, is a mindset that must be daily lived by top management all the way to the people in the field and back again.
Our growth path comes with great responsibilities and tough choices. The war in Ukraine has made it clear that business and communities need to become more independent from fossil fuels and to accelerate the energy transition. As demand shifts away from fossil fuels, electrification in the transport, building and industrial sectors could cut greenhouse gas emissions in the EU significantly by 2050. TenneT takes its responsibility to support this transition and has developed the so-called Target Grid 2045 to steer the future infrastructure expansion by anticipating sensing political developments and needs.
The Target Grid 2045 provides a realistic vision of the high-voltage grid on land and offshore, with power corridors connecting countries around us. Based on a back-casting approach, it allows early alignment among all stakeholders on goals and is based on relevant national infrastructure plans. With the goal of providing a fully sustainable energy system, we aim to deliver a future-proof, reliable and cost-efficient grid, ready on time.
The Target Grid 2045 is underlined by challenging targets for offshore wind development. For TenneT, it will be crucial to succeed in connecting 40 GW of offshore wind in the Netherlands and Germany by 2030. This is from a total of 65 GW committed to the Esbjerg Declaration, the first intergovernmental agreement between Belgium, Denmark, Germany and the Netherlands envisaging up to 150 GW of offshore wind to be built until 2050.
These objectives not only require political determination, but also important energy system innovations. We have developed a world-first with our proprietary 2GW direct current (DC) standard for offshore connection systems, allowing larger wind farms to be connected to the grid with fewer platforms and cables. Also, our 2GW offshore converter platforms are ‘hub-ready’. This means that they can be connected to a future DC grid. To truly make the North Sea a green powerhouse for Europe, TenneT is exploring options for energy hubs at sea. These will not only connect wind farms to onshore grids, but also serve as connections between North Sea countries. In time, these North Sea power hubs will also enable large-scale conversion of wind energy to green hydrogen.
Over the last year the Netherlands has seen a boom in business grid connection requests, adding to a total capacity of 40 GW. This is more than three times the electricity consumption of the whole of the Netherlands on a normal day. However, our grid capacity cannot be expanded at the same pace to meet sudden demand at this scale. We therefore paused issuing new connection requests for companies in some parts of the Netherlands. To accommodate different stakeholder interests, we initiated a national consultation process looking for more flexibility in the electricity demand of industry to facilitate new requests from customers. Under the auspices of the Minister of Economic Affairs and Climate, the National Grid Congestion Action Program was launched to create more space of the electricity grid in every possible manner.
As the electrification of industry advances, we call for more clarity on the transition plans of industrial end-users, allowing the switch to electricity to be better orchestrated in a non-discriminatory manner. In doing so, we advocate a smart location policy, in which industry requiring large-scale electricity consumption should preferably locate as close as possible to renewable generation, for example where offshore wind energy is connected to land. This avoids unnecessary additional infrastructure that would be necessary to provide electricity to energy-intensive consumers such as electrolysis plants, just like making use of the so-called emergency lane in our grids to connect additional solar and wind farms.
In an effort to shorten lengthy permit procedures, the Dutch and German governments have recognised that current permitting practices delay the energy transition. However, in the Netherlands we also expect the ban on nitrogen emissions to negatively impact the progress of our projects. In Germany, we welcome efforts to relieve delays such as simplification of legislation which would allow us to start construction of projects earlier.
As many companies and institutions, we are facing a tight labour market, particularly for highly skilled technical staff. The energy transition must move faster, so we need all hands on deck. We need to all the talent to the table: men and women, from the countries in which we operate as well as culturally rich, highly educated and practically skilled. Therefore, diversity is not a KPI for us but the essence of our business. We like to work together with other companies, the government and knowledge institutes to find, motivate, bind and grow all talents for a job in the energy transition. To address this, TenneT is partnering with universities and secondary vocational education institutions to bring in talented people and to partly train them internally. We also focus on specific target groups such as IT professionals with tailor-made campaigns.
As the energy transition can only succeed if tackled at European level, it is important for TenneT to engage in intensive international co-operation. This will ensure the functioning of integrated electricity markets which are key for a resilient electricity supply, especially during the winter. In the North Sea, we are a strong partner to realise its potential as a renewable power hub for Europe. To this end, we are developing an international agreement on technical standards and conditions, with laws and regulations and a well-functioning market model. As a leading cross-border grid operator, TenneT is closely involved in this joint effort, and will further expand its role as a reliable and independent advisor to governments.
Through intensified co-operation with our suppliers TenneT is helping to create an environment where market players can invest more securely, employ people with greater certainty and secure available resources in supply chains. We did this in 2022 by developing two large-scale EU tenders for long-term framework contracts for the development of the 2GW offshore connection systems. Such agreements create more certainty in the market for the required scale-up, giving the offshore industry the investment security it needs.
Our investments amounted to as much as EUR 4.5 billion in 2022. And investments will rise in the next ten years. As political ambitions evolve, we aim to deliver at least EUR 8 billion annually in projects. This is fully in line with the national energy policies of Germany and the Netherlands and largely attributable to the energy transition. In 2022 TenneT issued two Green Bonds totalling EUR 6.85 billion. With these offerings, TenneT strengthened its status as the largest corporate EUR green debt issuer globally, with currently approximately EUR 19.5 billion of green debt outstanding across different formats (senior, hybrid, USPP and Schuldscheine) issued in the last 7 years. It also shows the company’s favourable access to capital markets. To safeguard our financial health, we strive for a good balance between debt and equity allowing us to finance our projects as reliably and efficiently as possible. The Dutch state has given its commitment to shoulder the equity requirement for the Dutch part of our investment portfolio, currently estimated at EUR 10 billion. For our German investment portfolio, the equity requirement is approximately EUR 15 billion.
We look forward to further exploration and negotiation with the German state in cooperation with the Dutch state while moving 'full steam ahead' given the challenges and opportunities resulting from the energy transition. We, the Executive Board of TenneT, are personally committed to the European energy transition and to deliver on our promises. We also commit to lead this process and stay on board to create two national champions together with all our people and together with both governments to achieve the climate goals 2030 and beyond.
We are incredibly grateful to our colleagues and partners, for their commitment to accelerate the energy transition in the Netherlands and Germany and for all the extra effort to help our colleagues and the people of Ukraine. We thank all our colleagues wholeheartedly for their tireless efforts, resilience and commitment during a challenging and rather unthinkably impactful year 2022.
Looking ahead, we all trust to work together closely and with a shared focus towards the goal of a sustainable, reliable and affordable energy system for all. We are fully aware this will take perseverance. And by working together with all our stakeholders, we will build this new, meshed grid on land and offshore fit for the future. With a steady beat of endurance and determination we are changing the very heart of European energy. We are on it!
On behalf of TenneT's Executive Board, Manon van Beek (CEO)