Is the overcrowded power grid a threat to the Dutch investment climate?

Published on: 27 July 2023

Current issues related to economy, (responsible) investment, pension and income: every week, an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap of APG talks about the effect of the overcrowded power grid on the investment climate in the Netherlands. His tentative conclusion: “We all need to become more agile.”


Charging stations for electric cars, the heat pump that cools and heats business premises and self-generation of electricity through solar panels; the kilowatt hours are flying around the Netherlands. But this “greening” has limitations; the power grid is under severe pressure and new connections are becoming scarcer. Limburg, Brabant and even parts of Noord Holland are only allowing new power connections very sparsely because of the overcrowded power grid. This is something that makes companies inventive. At Schiphol Trade Park, for example, fifteen concerns have joined forces, sharing the limited space on the power grid. That was a success. And although energy experts agree that these kinds of new and collective ways of using energy should prevent the Netherlands from locking up in the coming years because the power grid is full, there is no question of a large-scale rollout of such initiatives. It prompted Astrid Sixma, a lawyer at Kennedy Van der Laan involved in the initiative at Schiphol Trade Park, to make sharp statements in the FD. She argues that although creative forms of energy sharing are legally tricky for grid operators, there is simply no other way. “Otherwise, the full power grid will become too big a problem for the energy transition and the investment climate.” Does Knaap agree with her?


Elastic concept 

“First of all, investment climate is a political term, and very elastic. That’s why the World Bank has developed the B-Ready program, to objectively and based on a number of parameters, determine what the business and investment climate in 180 economies worldwide actually is,” Knaap said. One such parameter being measured, according to him, is utilities. “To what extent, for example, do high costs, the cumbersome permitting process or the time-consuming process of constructing gas, water and electricity utilities affect business production? It is one of the ten factors that count for the business climate, so it is quite significant. But this is particularly true for emerging countries. Right now, electricity facilities in Western countries are not high on the list of constraints.”


Challenges in the Netherlands

But that does not detract, Knaap says, from the fact that there are challenges, specifically in the Netherlands, that also affect the investment climate. Many companies are waiting for a connection, resulting in delays and uncertainty about implementing new plans such as sustainability, relocation or expansion. The monopoly position of grid operators is part of the problem in the Netherlands, Knaap believes. “Grid operators are leading what happens on the power grid by region, and that monopoly can have disadvantages: the product is expensive, waiting times are long and people are not open to innovations.” The latter aspect is completely different in a competitive market, Knaap knows. “Take telecommunications in the past, with PTT Telecom as the autocrat. The costs and waiting times for a new connection were enormous. With the advent of the mobile network, that changed completely; a new connection today is free and arranged within a day.”

Grid operators are leading what happens on the power grid, that monopoly can have disadvantages


Because of their monopoly position, network operators are bound by strict rules. These are supposed to protect consumers, but are also constraining when it comes to renewals. Knaap therefore thinks that, in the existing situation, the network administrators should become more flexible. “Certainly in contractual terms.” The Consumer & Market Authority (ACM) seems to be paving the way for this. Indeed, ACM wants to make it possible for grid operators to offer contracts with so-called alternative transmission rights (ATRs) when transporting electricity, in order to create more space on the power grid. Knaap: “An example of this is contracts where the grid operator and the customer agree in advance that a connection cannot be used all day long, but that the maximum transport capacity is only available during off-peak hours. In addition, the ACM wants to give grid operators the option of limiting power if it is not used for an extended period of time. This is referred to as use-it-or-lose-it (UIOLI) or use-on-time-or-lose-it (GOTORK)."


Picking up the gauntlet

These are developments that can help companies, Knaap believes. “But we need pioneers who will pick up the gauntlet. Both on the side of the grid operators and on the side of the consumers. It’s always like that.” Knaap cites the example of Lombok, Utrecht, where a resident of the neighborhood started a trial of Smart Solar Charging some time ago. “With this system, cars can be charged when there is a lot of solar energy, and battery energy can be used in the house when the sun is not shining. This system is now active in many other places too.” The initiative at Schiphol Trade Park also deserves to be emulated, according to Knaap. “There you see that the rules get in the way of network administrators and companies. Hence the importance of more space. All of us, customers, network operators and government, have to become more agile. Not least because of the investment climate. After all, this climate determines the extent to which the private sector is inclined to make large long-term investments as well as small short-term investments.”