The role of transmission in the energy transition transcript

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Listen to this 16 minute discussion between Otto Jager (CFO TenneT) Martin Young (Senior Director, World Energy Council) and Paul Nillesen (Partner, Strategy& Netherlands) about the future of TSOs/ISOs in the Energy Transition.

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Podcast Transcript

Paul Nillesen:

Hello, and welcome to this new episode of our PwC podcast series in energy. My name is Paul Nillesen, and I'm the host of this podcast today.

Today we're going to be discussing the role of transmission in the energy transition in general and the strategic priorities of TenneT in particular, together with Otto Jager, the Chief Financial Officer of TenneT, and Martin Young, Senior Director of the World Energy Council.

We're looking forward to speaking to you today about this interesting topic, and we're very grateful to have Otto with us, as TenneT plays an important role in driving the energy transition.

So, welcome, Otto, and welcome, Martin.


Otto Jager:

Thank you, Paul.


Paul Nillesen:

So, Otto, I'd like to first give you the floor for some brief introductions and a brief summary as TenneT as a company, please.


Otto Jager:

Yes. Thanks very much. My name is Otto Jager. I'm the CFO at TenneT since about seven years now and have been working for the company since 12 years. I have seen quite some changes in that decade or so, but our primary talks are still the same. We are a transmission system operator. That means that we design, build and maintain a high-voltage grid, 110,000 volts and up in the Netherlands and 220,000 volts and up in Germany. We have about 30 percent of the grid in Germany and 100 percent of the grid in the Netherlands.

We also operate that grid, which means that we need to maintain the balance between demand and supply of electricity every second of the day. And we facilitate the European energy market.

As I said, we are present in Germany and the Netherlands. We have about 5,000 employees, 24,000 kilometers of lines and about [$]24 billion of assets on our balance sheet.


Paul Nillesen:

I think, Otto, in the past you were described as sort of one of the energy scale-ups, from a relatively small player in the Netherlands now grown to this massive player. And I think in the next decade you have significant investments coming up.


Otto Jager:

Yeah, you can say that again. I think when I joined the company, the company was about one-tenth the size that it is today, so that tells you a little bit about the growth. Most of that growth has been achieved through very large-scale investments. Last year we invested over 3 billion euros in infrastructure in both the Netherlands and Germany, and we have planned for the next 10 years between 40 and 50 billion euros of additional investments to build out the grid, both onshore and offshore.


Paul Nillesen:

Right. Thanks, Otto. Well, we'll dive into TenneT and the energy transition in a bit in more detail. I'd like to just introduce Martin Young, who's also on this podcast. Martin, could you introduce the World Energy Council and specifically also touch on the study that we co-authored last year on transmission?


Martin Young:

Thank you, Paul. The World Energy Council is the world's first global energy community. We began in 1923 in the aftermath of the first global flu pandemic and after the First World War with our far-sighted community then who were wanting to help the world electrify for a better economic future.

We had our first congress with the World Power Conference in 1924 and have been holding our congresses every three years since. Our last congress was in Abu Dhabi in 2019, and the next one is in 2022 in St. Petersburg. Probably more relevant for you, Paul, is the 26th one will be in Rotterdam in 2025.

The Council is open to all and is technology neutral, so we have a diverse membership of over 3,000 organizations that cover industry, government, academia, in almost 90 countries. So we're a truly global community with an agenda for more inclusive energy transition. I should say here now that PwC has been one of our longstanding patrons.

Now, moving to the study itself, PwC is our innovations partner who's worked with us on a couple of our innovation insights briefs. Previously we looked at blockchain but also the grid report that we launched last June. The study was called "Performing While Transforming: The Role of Transmission Companies in the Energy Transition," and it was based upon a series of high-level, in-depth interviews with the CEOs and the senior leaders of transmission system operators, but also independent system operators.


Paul Nillesen:

Thanks, Martin. Let's dive right in, then, Otto, and look at transmission in a little bit more detail with you. Could you give your view on how you see the role of transmission in this large energy transition challenge that we have?


Otto Jager:

I think transmission is about transporting a vast amount of energy, of electricity, over longer distances in a clean, affordable, reliable and equitable way. And next to that that's also very important of course is connecting large-scale renewables, especially offshore—and for us that means the North Sea—where there are gigawatts and gigawatts of additional wind farms being built and also planned for the future.

So I think we play a very important role in making the energy transition work and reaching the decarbonization goals that way. 


Martin Young:

Otto, can I follow up? How do you think the role of transmission has changed, particularly over the last couple of decades, and how do you think it's going to evolve in the next few decades?


Otto Jager:

I think transmission used to be a rather sleepy business where not much happened. We did a bit of maintenance and upkeep; not much further investment was required for a couple of decades, maybe until the start of this millennium. But what we've seen now is that electricity is the fastest-growing consumer energy. It's the basis for decarbonizing the transport, building and industrial sectors, and it must be transported to conorations and economic centers.

So it's quite a revolution that we're going through, and the grid is really the backbone of the energy system. Our energy system, one of the safest and most reliable in the world, was once built to meet just demand for energy, and now it's changing into a multi-functional connector of electricity supply, demand and storage.

As I already said, with an investment volume of between 40 and 50 billion euros, TenneT is making a very substantial contribution to this, making it one of the largest investors also in the energy sector in Europe. And we hope that with political support, that we will be able to further develop the energy potential of the North Sea hopefully around 2030. The North Sea will then become a powerhouse of North Europe. It is also our responsibility to bring green power to the centers of consumption and economic activity and to strengthen the existing infrastructure to make it fit for the net-zero CO2 future.

To this end, we are developing solutions today designed for the European electricity consumer of tomorrow. But we also must not lose sight of local needs, either. We cannot do this without the support of citizens, local and regional governments, and our customers. And we've seen that this is more and more important to get the buy-in of the environment, the people living also in the areas where we build this infrastructure, and it's not an easy thing. It takes a lot of effort and collective interest there.

But ultimately we need new routes, new wind turbines, etc., and we need to find a way to make this work for everybody to get to this new energy world. Think global, act local.


Paul Nillesen:

Nice. I like that, Otto. You touched on I think some of the challenges that you face when you're building out this infrastructure. Maybe just more broadly from an overall TenneT perspective, what are the key challenges and key priorities, both in the short term and the long term, for you as a company if you have to achieve all of this, Otto?


Otto Jager:

If we look at it holistically on a macro level, then it's about system thinking. It's about integrating large-scale production of offshore wind energy into the energy system, and both electrons and molecules are needed to meet demand there. But this requires that we coordinate the expansion of electricity transmission lines, electrolyzers, hydrogen pipelines and such.

In other words, we need an integrated system planning. That's the only way, we believe, that we can integrate these growing amounts of renewable energy into the electricity grids.

We also need European cooperation. The North Sea, I already mentioned it, connects us, and only if we do this together in a European context we can make optimal use of every electron generated at sea. So we need close cooperation between TSOs, governments, other bodies involved across the borders, and not only when it comes to the North Sea but also when we of course interconnect countries with each other. The more and more variability we have on the system because of the in-feed of renewables, the bigger an area you need to spread all these electrons over to also maintain the stability of the grid.

And then thirdly, we think that the development of offshore wind energy also must be linked to the development of industrial demand for electricity. It's nice to build a lot of gigawatts of offshore wind, but you also need to utilize it somewhere. Since large industry is responsible for about half of the energy consumption in the Netherlands, demand must also increase, so the industry will have to electrify.

Green recovery requires close cooperation between governments, industries and TSOs, and this requires the right stimuli and incentives. Subsidies are now mainly on the supply side, but we also need to think what do we do on the demand side. How do we incentivize or disincentivize the right and the wrong behaviors?

So these are some of the macro challenges that we see.


Martin Young:

Otto, I'd like to come back to one of the areas that you highlighted there, and that's about the need for flexibility. You've touched on a few of the aspects about what's driving it, about the variable renewables. I'd like to really ask you a little bit more about what TenneT is doing in this area and what you really need from other stakeholders.


Otto Jager:

Yeah, we're piloting a number of things. One of the examples is small-scale flexibility in terms of batteries that are in cars or in households that you may use to balance the grid better and offer of course those who own and hold these batteries also some financial incentives to do so. We're also talking to industry about how they can be incentivized to better regulate their power demand and how incentives can work there.

So, yeah, it's basically looking a lot at demand side response where we feel there is much to be gained and advanced yet. I think that's our main focus.


Martin Young:

Can I just follow up on that? You've highlighted demand-side focus, and I think that's a particularly interesting area. Do you think that the market structure needs to be looked at again?


Otto Jager:

I think market structure and market rules are important to make this all work. If you do not have the right incentives for players in the market to behave in a way to allow this better balancing, then technical solutions will not get you there. So I think it's the combination, indeed, of technical solutions but also market rules and market design that will make this work together.


Paul Nillesen:

Otto, let me change gears slightly and ask a double question, actually. Two themes that are extremely popular at the moment. One is around data, digital, analytics. I'd be very interested to hear what TenneT is doing on that front and what possibilities you see there. And the other is hydrogen. Everybody's talking about hydrogen, big plans for hydrogen. Is that something where you see an opportunity to make the connection with, say, the gas infrastructure and some of the other players in the market to perhaps increase flexibility?


Otto Jager:

Yeah, Paul, I think on the data and analytics side, we do see a lot more opportunity, also in terms of utilization of our grid. How can we use the vast amounts of data we have to better steer our grid, maybe also automate it, in a sense? Which allows, again, a greater efficiency. So we're spending quite some time on looking into that, also with universities and research institutions. So certainly a big role for data also in further optimizing the energy system.

In terms of hydrogen, a very interesting technology. I think it's important—we believe it's important to see it as one of the many opportunities that are still out there in the next decades in terms of creating a new energy system. It could be a very nice way to store also large amounts of electricity or convert it into hydrogen.

But there are of course also still uncertainties about scalability and the economics of that technology. So it's an interesting technology and it can play a very important role, and also the connection with electricity and the conversion back and forth could be very helpful in solving some of the issues that we're facing now.

It's also important not to lose sight of other solutions because we don't know exactly how this will play out and what the winning technology or the winning energy carrier will be, from where we stand today.


Martin Young:

Otto, can you tell me, Equigy—this is a unique platform. What is it, and what do you want to achieve with Equigy?


Otto Jager:

Yeah, I think Equigy is a very good example of basically piloting a new type of technology. It's using blockchain. It's focused on consumers who have batteries or heat pumps, so the batteries can be a car battery or a home battery, who can offer basically primary reserve, who can offer storage capacity or additional electricity that they have and enter that into the system as a service to us to balance the grid. And of course there will be some financial compensation for it.

Meanwhile we have this running in the Netherlands and part of Germany. We've also teamed up with the Swiss and the Italian TSOs to offer this. So it's a very exciting platform to see if we can entice consumers to participate efficiency in this electricity market directly by offering balancing electricity on a small-scale basis.


Paul Nillesen:

Thank you, Otto, for that great answer. My challenge now is to summarize this great discussion. Not easy, but I'd like to draw out three points that stood out for me. One is we need to cooperate across all stakeholders. This is critical to help the energy transition happen. The second is to ensure sufficient flexibility with as many players in the value chain participating in providing this flexibility, to help manage the system. And third, to incentivize demand for renewable electrons, to make sure that we have enough off-take for all these electrons coming on the system.

Otto also mentioned this phrase "collective thinking," and I really like that. We need to put the best of everybody together to really help us drive the energy transition in that way.

Now, before I thank Otto and Martin, I'd like to draw your attention to the publication that Martin summarized. This publication is available on our website and on the website of the WEC, the World Energy Council, so please take a look at that.

Finally, Martin, thank you very much, and a big thank you to Otto. Thank you for your time today. I'm sure our listeners are going to enjoy listening to you, and it's been a pleasure having you here. So, thank you.


  • Otto Jager, TenneT
  • Martin Young, World Energy Council
  • Paul Nillesen, PwC Strategy&

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Paul  Nillesen

Paul Nillesen

Energy Practice Partner, Strategy& Netherlands

Tel: +31 88 7927237