No energy transition without transmission

Blogseries on bridging the energy transition gaps |
#1 Transport & infrastructure

The European Green Deal and regulations such as the Climate Act and CSRD are intended to accelerate the energy transition. The goal: to realize Europe being the first climate-neutral continent by 2050. To achieve this, several major gaps still need to be bridged - including in the areas of energy transport and infrastructure. Because without transmission, there can be no transition. Expanding and adapting the network takes time. In the meantime, behavioral change is key, according to PwC experts Juliette Marsé and Paul Nillesen.

Most people do not realize how electricity enters homes and businesses. In fact, it is actually a great compliment to the industry: it seems like a miracle that an electrical device always works. In reality, the electricity network behind the power socket is enormous, but this enormous 'miracle' is under tremendous pressure due to the current energy transition.

Less control over renewable energy sources

The pressure on the electricity network has several causes. The first and most obvious one: green energy is more difficult to control. Old gas power plants would simply turn on and be adjusted every fifteen minutes. Now we are dealing with renewable energy sources that we have less control over, such as wind and solar. With the whims of nature, it is a major challenge to get the energy through the network in the right way - there needs to be enough energy when there is no sun and wind, and the network should not be overloaded during peak times.

At the same time, the demand for energy is growing enormously because we are electrifying everything. Cars are going electric and homes are being heated electrically, the industry is partially switching from gas to electricity for the production of steel, cement, and chemical products. But also think of the use of AI applications like ChatGPT, overflowing mailboxes, and countless videos that are uploaded online every day. Huge data centers are being built for all that data, which require energy. The capacity of the network must therefore be increased. 

In addition, with electrification, we are making a switch from molecules to electrons. This requires a network that can support the transportation of the energy carriers of electrification. Oil or gas can be easily transported without energy loss through a pipeline, but electricity is more difficult to transport from point A to point B. Different transportation carriers are needed for that. Hydrogen is one of the major solutions that should help with this, but even with hydrogen, the conversion process results in significant energy loss. Therefore, we still need to take significant steps in the development of such solutions.

Collaboration in energy transition with a key role for network operators 

If network operators now make large-scale investments in these types of solutions, we see that they have to be recovered through network tariffs. This means that connection costs for companies and consumers will increase. This year, network tariffs have already risen significantly. Not only is this bad for the Dutch business climate, it also creates uncertainty for companies that want to invest in sustainable solutions. However, we need these investments urgently for a breakthrough in the energy transition.

The transition depends on many parties. The government creates conditions and provides direction through policies, consumers invest in new technologies and switch to alternative energy sources, and network operators ensure that supply and demand are balanced. The role networks play is unique because of the long-term nature of the investments made by the network operators. In the past, the network followed developments in supply and demand, but increasingly the network operator determines where supply and demand can develop. All players have an important role to play, and further collaboration between these players will be necessary to shape and realize the energy transition.

Thinking differently about how we use energ

An additional challenge is that developments in energy transition are happening at different speeds. A household can sell their gasoline car and start driving electric or install a heat pump within a month. Even the construction of a solar park can be completed within nine months. Both on the demand side and the supply side, the developments are happening in a fast pace. However, the connection between them takes much more time: adapting the network takes years.

Therefore, we also need to think differently about how we use energy. We can already see some examples, such as power sharing between parties in larger business parks, but also at household level with "energy weather forecasts" for turning on the washing machine or charging the car. Behavioral changes are never easy, but they are essential to make optimal use of the existing infrastructure while building on a large scale. Where technology is a challenge on one hand, it is also part of the solution on the other hand. 

This is the first blog in a series about the 'gaps' that need to be bridged for a successful energy transition. The next blog will be about the financing of the transition.