Thinking differently, doing more
The energy transition is changing our energy system. Companies are transitioning from natural gas to electricity and eventually also to hydrogen. Households are switching to (hybrid) heat pumps, electric vehicles, and induction cooking. This change leads to the largest renovation of the energy system in our generation: from a system based on fossil sources to one based on sustainable sources. We therefore focus on expanding the electricity grid.
We anticipated an increase in demand for electricity. However, the pace of that growth was unforeseen by anyone. The acceleration has come much sooner and is much greater than expected. Not in the least due to the enormous rise and uncertainty about the gas price, as a result of the war in Ukraine, and the national incentives for sustainability. These factors have increased the urge to transition to sustainable energy for many companies and households. As a result of these developments, the gap between what is needed and what we can build has widened rather than narrowed.
As a consequence, in 2023, we had to inform large business customers that unfortunately, it will take a long time before we can offer them a new or upgraded connection. Sometimes as long as five to ten years. This is a tough message that we deeply regret because it means these entrepreneurs have to postpone their plans or find other solutions.
Additionally, it became clear in the sector last year that if we do not take drastic measures now, households and businesses with smaller connections will also be affected in the near future. This is because we cannot connect new homes or carry out upgrades without long waiting times.
Record expansion of our networks
At the same time, in our consultations with large business customers, the national government, municipalities and provinces, we see a growing awareness that electricity grid congestion is a new reality in the energy transition. A reality that requires Enexis to continue to invest huge amounts in the expansion and upgrading of our infrastructure. And that is exactly what we are doing. Thanks to the unprecedented efforts of our employees, we added another record amount of capacity, 2,180 megawatts, in the past year, and we will continue to do so steadfastly in the coming decades.
In November, we announced in our investment plan that we are expanding all of our 125 high-voltage stations and building a large number of new stations. In the next three years, we will lay 6,860 kilometres of cables and invest in 4,140 transformers and other components. In the coming years, we plan to double the capacity of our electricity grid, that we built during the past fifty years.
We are working on more transparency for, especially, large business customers, so they know what to expect. To this end, we make use of waiting list maps that provide insight per station into how many large business customers are on the waiting list and how much capacity they require. We supplement this information with the expected delivery times of our own stations and those of TenneT.
Awareness about the changing energy system
The changing energy system forces us to adopt a new perspective on energy usage. It requires all users to handle electricity differently than they are used to. That households and businesses primarily consume electricity when there is ample energy available from wind or solar sources. This is a significant adjustment. In 2023, we prepared a campaign aimed at raising awareness among all our customers about the congested power grid. What will they notice, and above all: what can they do themselves?
We are constantly engaged in exploring innovative ways to make the energy supply more efficient and to better utilize the capacity of our grid. We are looking into various possibilities, ranging from technical solutions to new contract forms. In this context, we concluded a so-called 'peak avoidance contract' with one of our customers, Eneco, in August 2023. To avoid overloading the grid, Eneco will deliver less wind energy during peak hours. We can take these kinds of measures because through digitization, we have a good understanding of current usage and can make predictions about future usage of our grid.
Furthermore, we expect a lot from the measures that the Dutch government announced in October, such as stimulating the charging of electric vehicles during off-peak hours. We are also pleased that the government has made € 166 million available in the form of new initiatives to stimulate establishing energy hubs. In these hubs, businesses coordinate their own electricity demand and supply locally. As a result, they require less capacity on the energy grid. We make this possible by intelligently combining available data and then making it transparently accessible to our customers
And our gas grids? We continue to work on maintaining the safety and reliability of our gas grids during all our construction activities. The gas grids still remain necessary, and not only for natural gas. They can also be adapted to accommodate alternative energy carriers such as green gas and hydrogen. These new energy carriers are an integral part of the solutions to reduce pressure on the electricity grid. Therefore, we invest in projects with which we can enable an increase of the share of green gas and hydrogen.
Proactively working on expanding grid capacity
In the meantime, congestion is also increasing in local low-voltage grids in residential districts. Electrification and the installation of (hybrid) heat pumps are leading to an overload in more and more areas. Together with contractors, we are going through our regions from district to district to proactively prepare our low-voltage grids for the future. This may result in us not immediately resolving individual voltage problems everywhere. As a result, households may sometimes have to wait longer for their problems to be resolved. On the other hand, in this manner, we are expanding our grids faster for the future and we are preventing new problems.
We start in the municipalities where the (technical) congestion areas are greatest. Partly due to sensors in our network, we have a good understanding of that. During this district approach, we aim to prepare everything, from permits to spatial integration, together with the municipalities, so that we can start work immediately. How we want to shape this was presented, together with the other network operators, in the National Execution Agenda. Over the next few months, we will make agreements with social partners and governments on the implementation of this agenda and what is needed to further accelerate our production.
More technicians on board
Another important prerequisite for scaling up our production is to attract enough technicians. As in many sectors, the shortage of skilled technical personnel is a major challenge. But despite the tight labour market, we made great progress with regard to the recruitment of new personnel in the past year. Already early in November, we achieved our goal for the whole year: no less than 370 FTEs technical personnel started working at Enexis in 2023. This is the result of an enormous effort by our recruiters, a successful labour market and referral campaign, and higher wages for technical personnel. We made a huge effort to train these employees to become skilled and safety-aware professionals - also through our own training programmes and facilities.
Nevertheless, we still need more people. Therefore, we are intensifying our collaboration with contractors. For example, in July, together with other infrastructure companies, we awarded a huge € 2.5 billion work package contract to construction partners in the Netherlands and abroad. This concerns a contract for no less than eight years for carrying out energy, drinking water and telecommunications work in the northeast of the Netherlands. As a result of the large scale and long duration of this contract, these companies are assured of work and can thus safely invest in skilled personnel. We are also outsourcing more tasks than we usually do - not only the construction work itself, but, for example, also the preparations for this work. In this manner, we make working for Enexis a lot more interesting for these partners.
Investments continue to grow
The unprecedented task to prepare the energy grid for the future requires huge investments. Our total investment level amounted to over € 1.1 billion in 2023, a growth of 27%. These investments are refunded with a delay via our tariffs. In 2023, we spent about € 1.5 million a day more on the energy transition than we received via the tariffs. Unfortunately, this shortage will increase in the coming years.
Enexis has a solid financial position with strong credit ratings at Moody's and S&P. Both credit ratings were revised upward due to the likely future support of shareholders. These upward revisions support the funding of the energy transition and contribute good access to financial resources.
We realised a net profit of € 72 million from ordinary activities in 2023. Compared to 2022, this represents a profit decrease of € 115 million (not including the proceeds of the sale of Fudura in 2022). This decrease is mainly attributable to higher purchasing costs for transmission services and distribution losses, and higher operating expenses.
Reliability remains stable, significant improvement in safety at work
We are not only expanding our network. We also ensure that it continues to function well during the renovation. As in previous years, the reliability of our networks in 2023 was around 99.996 percent. However, unfortunately, we scored above our own norm of 17.5 minutes of outage. On average, our customers were without electricity for 20.0 minutes and without gas for 137 seconds. This is the result of four major outages that lasted long and affected many households. We are now carefully investigating the cause to understand why these disruptions occur and what we can do to prevent them. Because although our emergency teams are still able to solve problems at the same speed, there is a possibility that the number and duration of outages will increase in the future. This is a consequence of the fact that we are pushing the limits of our network to create as much space as possible for our customers.
We accomplish more work together, and the best news is that we do it increasingly safely. In 2023, we had the lowest number of accidents resulting in absenteeism in years. Not only at Enexis, but also among our contractors, this number was significantly lower than in 2022. A wonderful achievement that we are proud of. However, every accident is still one too many. That's why, in case of incidents and accidents, we examine exactly what happened and what lessons we can learn from them. Because the safety of our people and the environment is our top priority in everything we do.
Our people go above and beyond for the customer
Talking about our people. We would like to thank our employees for their exceptional commitment and dedication in 2023. Our colleagues did their utmost to provide the best possible service to our customers. This is something they have always done, but they redoubled their efforts in the past year. With a considerable amount of frustration that we are not able to fulfil all our customers’ wishes at present, but with extra motivation to offer a better perspective to customers as soon as possible. We value this greatly.
Sadly, we saw that chairman Evert den Boer had to resign from his position due to health reasons. Fortunately, a new chairman and a temporary chief operating officer were quickly appointed. With renewed energy, we joined forces with this team.
Together with all those involved and skilled colleagues and partner contractors, Enexis will be taking bigger steps at an even faster pace. This way we are able to help households, businesses, and the climate move forward.
Executive Board Enexis Holding N.V.
Rutger van der Leeuw
Mariëlle Vogt
Jeroen Sanders
Liesbeth Kaashoek