Our story in 2019
As in 2018, the economy grew in 2019 and the energy transition has moved up a gear. The number of requests for connections for large companies has increased seven-fold in just a few years, we laid over 200 kilometres more medium-voltage cable than in 2018 (+38%), we connected 721MW of solar power (+48%) to the grid, and 1,712 public charging points for electric cars were installed in our service area (+39%). And, during all of this, we (and our contractors) were faced with a serious shortage of technicians in the Netherlands.
As we look back over 2019 we have a double message to pass on. On the one hand, we are proud of our employees because we achieved our highest production level ever. Moreover, we worked on putting important innovations into practice, such as the flex-market in the Zuidplaspolder area. On the other hand, in 2019 it became abundantly clear that, in the Netherlands, there are limits to what the electricity grid can handle. It is now so busy in parts of our network that our customers are unable to get new connections or additional capacity; before this can happen, existing power stations will need to be expanded or new ones built. Unfortunately, due to lengthy permit procedures and the acute shortage of technicians in the Netherlands, that takes time. We find this a very unfortunate situation for our customers. We devote a lot of attention to our dialogue with them and, fortunately, the effects of this are reflected in the low number of complaints and high customer satisfaction.
Dutch Climate Agreement and RES
There will continue to be a great deal of work to be done over the coming decade as well: in the Climate Agreement drawn up in the Netherlands in 2019 (referred to as the ‘Climate Agreement’ in this report), it was agreed that, throughout the Netherlands, 35 terrawatt hours of renewable solar and wind power produced onshore would be fed into the grid by 2030. In addition, by 2030 more than 1.5 million homes must be removed from the gas grid and heated differently, and 1.8 million additional charging points for electric cars are also needed. The Dutch electricity grid was never designed for all those wind turbines, solar panels, charging stations, and heat pumps; nonetheless, the infrastructure must be ready on time. Studies that we performed after completion of the Climate Agreement showed that, roughly speaking, demand for electricity will have at least doubled by 2050. That will put greater demands on our network. In Amsterdam alone, we need six to eight new electrical substations by 2030 to facilitate growth and sustainability, while permit processes can take years, physical space is scarce, and the Netherlands is grappling with a shortage of technicians.
It is therefore essential that we know what work needs to be done on the energy infrastructure, where it needs to happen, and when. The Regional Energy Strategies (RES), which the municipalities and provinces started developing last year, are crucial in doing just this. With our knowledge and expertise, we contribute very actively to the formation of these RES. In addition, we are consulting with stakeholders with the aim of bringing laws and regulations that date back to a time when there was hardly any decentralised generation of energy into the 21st century, with a view to bringing about the energy transition. One example is the introduction of the transmission capacity statement (transportindicatie), a measure aimed at ensuring that there is sufficient network capacity to transmit sustainably generated energy.
As in previous years, in 2019 we devoted a lot of energy to recruiting technically-minded colleagues, and we are pleased to report that we were able to welcome an additional 262 specialist technicians to the company last year. However, it takes years to train the technicians and training facilities are in scarce supply: in 2019, we were already stretched to the limit in terms of training resources and opportunities. Currently, 34% of our service technicians are in training. We work in close collaboration with the industry and regional educational institutions to spark the interest in more young people for a job in the technical sector. We also develop innovative collaboration concepts with contractors with the aim of increasing the number of technicians in the Netherlands.
Safety is a key priority at Alliander. This applies to our employees, people in the surrounding community, customers, and contractors. Unfortunately, our Lost Time Injury Frequency (LTIF) increased to 2.1 from 1.4 in 2018; fortunately, no serious accidents occurred. We have, however, commissioned research into the exposure of our employees to hazardous substances such as benzene, asbestos and chromium-6, and revised the work instructions where necessary. We also directed our attention to environmental issues like PFAS and nitrogen.
The Netherlands boasts one of the most reliable power grids in the world, with a 99.99% availability rate. In 2019, customers were, on average, without electricity for 21.9 minutes (2018: 30.6 minutes) and without gas for 40 seconds (2018: 39 seconds). We also used the Smart Cable Guard – a monitoring tool that anticipates disruptions – in our electricity grid on a larger scale. Moreover, in 2019 we started locating weak spots in the grid with the help of data and AI, enabling us to replace these components before they can cause a power outage.
Highly effective organisation
The energy transition is presenting Alliander with the biggest job it has ever faced in its 100-year history. To be able to take on this challenge, it is essential that all employees have the same objectives in mind and that the organisation become more resolute and effective. Based on the results of a strategy alignment survey, all teams in the company have been discussing Alliander’s core objectives. Moreover, we started a redesign of our organisation in 2019, which we expect to complete in 2020. Major steps in this regard have already been taken by our IT department and Qirion.
Sustainable business practices
Alliander is working towards having climate-neutral operations by 2023. We are increasingly focusing on reusing components and on recycling raw materials that are becoming ever more scarce. In 2019 we purchased 30% of our materials on a circular basis. We have decreased the energy consumption in our buildings, and a quarter of our lease cars are now electric. In Groenlo, we installed a sustainable, energy-neutral and partly circular substation, and we have taken further steps towards ‘greening’ our network losses. In September 2019, we signed a contract with Danish power company Ørsted to reduce our carbon emissions by around 25% annually. Added to other measures, this new contract ensures that more than 95% of our network losses will be offset.
Alliander’s profit after tax came to €253 million (2018: €334 million). Profit excluding incidental items for 2019 worked out at €267 million, up €6 million on 2018. Total expenses showed a limited increase to €1,591 million (2018: €1,572 million) and Alliander’s total investments ran to €834 million in 2019 (2018: €731 million). Alliander’s high creditworthiness was reaffirmed by rating agencies S&P and Moody’s.
Changes to the Management Board
As the energy transition, new technologies, and digitalisation are accelerating and having an ever greater impact, we need additional focus in how we run Alliander. With this in mind, Daan Schut joined Alliander’s Management Board on 1 April 2019 as the Chief Transition Officer (CTO). His main focus is the completion of the energy transition and digitalisation measures. With Walter Bien joining us as our new Chief Financial Officer (CFO) on 7 October, we were able to welcome a director with the financial background needed to deal with the issues posed by the energy transition. He succeeded Mark van Lieshout, who stepped down as Alliander’s CFO on 1 March. We would like to thank Mark for the many years he has dedicated to building the company we know today.
Although economic growth is expected to slow down, the energy transition is exponentially increasing in intensity. This means that a number of fundamental issues lie ahead of us in 2020: doubling production in the coming years, the long-term financing of the company, and intensifying collaboration with partners like other network companies, contractors, installers, and municipal and provincial authorities.
Thousands of employees work with Alliander and our contractors every day to get the job done. They are our most important asset and resource. It is these people who are in contact with our customers each day and who work together on our mission: ensuring that the lights are on, homes are heated, and businesses can keep operating, even in these complex times, as we transition to a new, sustainable energy system. We would like to extend our special thanks to these people for their contribution.
Together with our stakeholders, in 2020 we will continue to work on our biggest challenge, the one that faces us all: ensuring an energy supply that gives everyone access to reliable, affordable and renewable energy on equal terms.
Ingrid Thijssen, Walter Bien, Daan Schut
Alliander Management Board
From left to right: Walter Bien, Ingrid Thijssen, Daan Schut