The Energy Transition in The Netherlands: the individualization of formerly collective utilities and the consequences for the affordability of such utilities

A few weeks ago, my company ‘The Future Group’ organized an innovation event in Amsterdam, in combination with the Dutch subsidiary of IBM. 

Logo of The Future Group Innovation Event
held on May 21st, 2015
Logo courtesy of: The Future Group
Click to enlarge

It was an interesting event with inspiring and very interesting speeches, regarding topical subjects in the areas of government, ICT, telecommunication and energy.

Apart from the heart-warming and utterly inspiring keynote speech, from a Dutch sportsman, who endured a heart-transplant and subsequently managed to participate in the Iron Man triathlon of Berlin a few years later, there were a number of sessions dealing with current trends like:  

• big data;
• mobile computing;
• the internet of things;
• doing business using private and public clouds;
• dealing with privacy issues with ubiquitously stored private data etc. 

By coincidence, I chose to visit two separate sessions, which dealt more or less with the ongoing energy transition in The Netherlands. Especially this energy transition is a very interesting topic to ponder upon.

But what ís that so-called energy transition exactly?

Traditionally, electricity and gas have been typical substitute/ complementary utilities of a collective nature: virtually all households in The Netherlands had either both or at least one of them. Both electricity and gas can be used for cooking and heating the house and (on top of that) gas can be used in order to generate electricity for household appliances, when the latter is not available as a utility.

One of the growing number of houses in Almere,
equiped with privately owned solar panels
Photo copyright of: Ernst Labruyère
Click to enlarge

Another one of the growing number of houses in Almere,
equiped with privately owned solar panels
Photo copyright of: Ernst Labruyère
Click to enlarge

Both these utilities gas and electricity must be ubiquitously available and they always have to work, at any time in the year, without any disturbances and delays. Period…  

The extremely high demands regarding the availability and the meantime between failures of these utilities, as well as the massive investments that had to be made by the central government to make them available all over the country, made it typical collective utilities. 

There was no way for people and companies to arrange these utilities for themselves, due to the massive investments that these required. That was unless people decided to install propane gas tanks in their gardens and company properties. This was something which virtually nobody wanted, of course.

Two of the growing number of houses in Almere, 
equiped with privately owned solar panels
Photo copyright of: Ernst Labruyère
Click to enlarge

So when a new industrial/commercial zone was developed or when a new neighbourhood was built, these collective utilities were always made available for the new inhabitants of such areas.

While this is still true for the natural gas supply in The Netherlands, there is a big change going on regarding the supply of electricity: the energy transition.

One of the growing number of houses in Almere,
equiped with privately owned solar panels
Photo copyright of: Ernst Labruyère
Click to enlarge

During the last few years the availability and affordability of solar panels exploded, due to the massive imports of relatively cheap solar panels from China and due to special subsidies which enabled households to buy such solar panels at a "bargain" price. 

As there have also been growing possibilities for companies, neighbourhoods and areas to ‘adopt’ a small windmill or participate in a local solar farm, the effect was that more and more households, companies, areas and neighbourhoods turned into nearly self-supporting energy consumers.

This individualization process for the generation of electricity has been further accelerated by the legally mandated possibility to sell and deliver excessively generated electricity back to the ‘grid’, at nearly the same price as for which households and companies normally purchase the electricity. 

This process is powered by the national deployment of the so-called smart electricity meters, which monitor the exact energy usage online and real-time throughout the year and notice when locally generated electricity is delivered back to the grid.

The effect is that households, neighbourhoods and companies, equipped with solar panels, have turned into net-suppliers of electric energy during daytime – when the solar panels yield the vast majority of their energy, but households on the other hand mostly require less of it – and net-consumers during evenings and nights – when the solar panels don’t yield energy anymore, but households require most of their electric energy.

Neighbourhood in Almere which
collectively owns and exploits a solar farm,
Photo copyright of: Ernst Labruyère
Click to enlarge

The same solar farm now
photographed from a different angle,
Photo copyright of: Ernst Labruyère
Click to enlarge

In my domicile Almere in The Netherlands, for instance, there is a steady growing number of citizens that generate a substantial part of their electric energy through privately owned solar panels or through a small solar park in the neighbourhood, of which they are partial owner (see the aforementioned pictures).

From the point of view of “greenification” of energy, this is a very favourable development. The solar panels, when maintained and cleaned normally, have a lifecycle of about 25 years and earn themselves back in 5 to 7 years. This means that these solar panels earn money for their owners for a period of about 18 to 20 years and on top of that help to diminish the pollution coming from power plants, running on gas and coal.

A few of the hundreds of windmills near Almere 
which are used for private/collective energy generation
Photo copyright of: Ernst Labruyère
Click to enlarge

The same is probably true for privately owned windmills, although these are much more susceptible for interferences, maintenance and (extra)ordinary wear-and-tear and might have a less favourable earnings model eventually.

Although this all is very positive development from many points of view, there are yet a few dangerous snags in the individualization of the electric energy supply in The Netherlands:

The Grid

Due to the legal obligation for energy suppliers to buy back excess energy from solar panels and privately owned windmills, there can be extra strains within the Dutch energy grid, which is generally quite old and not fully up-to-date and capacity on many locations.

As most of the privately owned solar panels (i.e. owned by households) yield their energy during times of low energy consumption (i.e. daytime), there is the possibility that this excess energy could lead to an overload of energy capacity on local and municipal grids, especially in case of very sunny days, when a lot of energy is generated and little of it is used; an overload which perhaps can not be handled anymore by the Dutch national grid owners TenneT, Liander and Alliander, when the number of privately owned solar panels keeps on rising.

Power plant in Almere, which might be abolished
as a consequence of the individualization of energy generation
Photo copyright of: Ernst Labruyère
Click to enlarge

At the other hand, for such households with solar panels there is still a need to acquire energy from the national grids during evenings and nights. Then the members of the household are at home and use all their electrical equipment, while their solar panels don’t yield energy anymore. Especially the energy consumption of recharging electric cars and plugin hybrids during evenings and nights is very considerable and can lead to an excess demand for energy during night times.

In my opinion this conundrum must and can be solved through the introduction of smart energy storages, which either use very efficient batteries, hot water pressure tanks and solar boilers or high-tech capacitors. All these appliances must be able to store massive amounts of energy during daytime, while yielding the energy during evenings and night time, when the demand for energy is highest. 

I expect that some remarkable progress will be made during the next decade with such smart energy storages, so this problem might solve itself soon.

Have and have-nots in energy supply?!

However, there might be a second problem which will be not so easy to tackle:

At this very moment, the people owning private solar panels or participating in a local solar farm or windmill can still be considered as front-runners, of which there are not too many. 

They are a mixture of idealists with a green heart and entrepreneurial middle and upper class people, which are lured by the subsidies and the possibilities to save a considerable amount of money on their energy bills.

However, when this individualization of the energy supply marches on in The Netherlands, and especially the energy storage problem is cracked with the invention and world-wide deployment of smart energy storage solutions, more and more people could become totally self-supporting with their energy supply, within perhaps one or two decades. This means that these people can eventually disconnect themselves from the national energy grid and exclusively use their own private or local grid. 

However, this will not be possible for all people in The Netherlands.

Especially people in the lowest income classes, who simply can’t afford such expensive solar panels and also cannot participate in a local solar farm or windmill, or people living in condos and rental houses, who are not allowed to do so either, will always remain dependent from the national energy grid.

This means that the same national grid, bringing the same massive infrastructural expenses for construction and maintenance, will be used by less and less people – and as a matter of fact mostly the poorer ones. As a consequence of this reduced usage, the grid expenses per unit might soar, leading to substantially higher energy expenses for such poorer households.

And there is more.

Large industrial companies and other massive users of energy – especially large industrial plants, steel mills, oil refineries, aluminium plants, greenhouse exploiters and recently data centres belong to the most intense users of energy – often negotiated extremely low energy prices and very favourable terms for themselves.

These negotiations forced the national suppliers of energy (Nuon, Essent, Eneco and others) to grant these companies massive discounts and perhaps even to supply energy, close to or even below cost price.

As this is not a viable business model in the long run for the large energy suppliers, these discounts need to be earned back from their private and small corporate customers, through an increase of energy and energy transport fees. 

In combination with the diminishing numbers of private energy consumers, this could lead to a double whammy for the lowest income classes, who don’t have the possibilities to acquire their energy from an alternative source.

This could lead to a new generation of “haves and have-nots” in The Netherlands, in which the latter have to mainly foot the bill for upholding the national energy grid.

So although you can consider me an endorser of the currently ongoing energy transition, it would not be wise to close our eyes for the unfavourable side-effects that this transition might have for the lowest income classes in The Netherlands.