The clean energy gridlock in the Netherlands with Karen de Lathouder (Eneco)

Most countries are racing to build more clean energy. The Netherlands is uncovering what that future may entail. It may have gone too big, too soon, or in the wrong places. Most countries are racing to build more clean energy. The Netherlands is uncovering what that future may entail. It may have gone too big, too soon, or in the wrong places. The grid is jammed, big industrial users can't get connections, and the demand that should soak up clean electricity, factories, heat pumps, EVs isn't growing fast enough to match.

And that's the bottleneck of the Dutch transition, and it's what today's guest spends her days trying to solve. Karen runs the asset based energy business at Eneko, one of the Netherlands largest utilities.

They build and operate the critical components, wind farms, solar parks, batteries, trading desks, and district heat networks. But in the Netherlands, grid capacity has run out and projects are stalling. Some developers are turning to non firm connections or colocating new loads like data centers, greenhouses, and industrial eboilers right next to where that power is generated.

It's a workaround, but it's faster, cheaper, and increasingly necessary. Even batteries, an obvious fix, face their own hurdles. In the Netherlands, they're treated like grid users, which means high tariffs and lower profits effectively being double charged. That's encouraged companies like Eneko to build storage in neighboring Germany and Belgium where regulation is better adapted to the changing technology mix even though the Netherlands arguably needs those batteries more.

And this is reshaping how projects get financed. Karen says the age of merchant renewables, so projects that live or die by market prices alone is fading. Eneco's strategy reflects a pragmatic approach to this challenge. They balance renewables with short term flexible assets like batteries and longer term backup, still gas for now.

They're also building smarter demand, flexible electrification, dynamic tariffs, and virtual power plants that shift consumption automatically when the grid needs it. If you can't make a system bigger, the theory goes, you should focus on trying to make it smarter. So whilst this is a Dutch story, it's also a preview of what can happen elsewhere. When ambition outpaces infrastructure, the problem isn't generating clean power.

It's connecting it, storing it, finding the right kind of demand to use it. Building renewables is phase one. Making the most of them on a crowded interconnected network, that's the real challenge. So welcome back to transmission.

Let's dive in.

Hello, Karen, and welcome to transmission.

Thanks, Ed. It's nice to be here.

Very good. And let's jump in with our standard question. So who are you and what's your role in an echo?

My name is Karen Delotheutter. It's a very Dutch name. Don't try to pronounce it. I work for a Dutch energy company called Eneko, and my role in Eneko is I'm in charge of the asset based value chains.

What does that mean? It's the value chains that have the the steel, so to say, the production of electricity. So the value chains I lead are heat. So we produce, distribute, and sell heat.

Renewable power. We produce and sell renewable power. So wind turbine, solar energy, batteries. And also flex.

That's, like the normal gas flex, and also batteries and new flex, so hydrogen development, etcetera. So those value chains end to end from building the assets to operating assets to to trading the energy, those three value chains report to me.

Okay. And it's a little bit of kind of the traditional in terms of, say, gas flex, but as well sort of batteries and hydrogen coming through in your role. For people not so familiar with Eneko, would you like to just describe who they are, where they're based, kind of key markets?

Yes. So Eneko is a Dutch integrated energy company, which means we generate our own power, and we trade in power and gas, and then we deliver that to our customers. And those can be both house households or, businesses.

And, we're not only active in the Netherlands, but as well in Germany, Belgium, and the UK. We're very small in the UK, but we're active here. And we have about two point five gigawatts of own renewable assets installed, and we have around four thousand employees, and we're headquartered in Rotterdam.

Okay. Amazing. And just to give people a little bit of a sort of split between sort of the more, I suppose, traditional side and then some of the newer techs coming through, what would you say the balance is between some of the sort of more gas oriented to some of the more hydrogen and battery oriented business chains at the moment?

Well, we're very ambitious in terms of renewable energy. Our ambitious is ambition is to be climate neutral in twenty thirty five. So since two thousand seven, we've been very actively shifting from traditional gas fired power plants to more renewable based assets, but also helping our customers decarbonize completely. So we've shifted our portfolio massively from gas towards renewables.

As in every market, I think we still need a bit of gas flex. So we have that, to balance and to trade. But in general, we're we're more and more shifting, towards renewable power, maybe the last ten years. Now we see the market is really in a new phase where demand is kinda stagnating, and it doesn't work to just build renewables, but you need balance. So we're moving into batteries, hydrogen, eboilers, some new flex to actually balance and and make our own portfolio more resilient.

Yeah. And I'm gonna come on in a second to ask you a little question around, the Netherlands and how do the power markets work in Netherlands. But you just mentioned there around demand stagnating. I think, actually, it's one of those trends across Europe that's really interesting.

Every every time you see a kind of forecast, you see the demand kind of moving upwards. Right? Because we expect electrification of vehicles, electrification of heating, and you kinda think, okay. Well, this is this this demand is coming.

How how sort of pan European is that trend for demand being quite flat?

I think we see it across the board. Maybe in different countries, there might be different reasons. In in some places, it's congestion based, so a company can't electrify because there's no grid connection. Specifically for the Netherlands, I would say there's a bit of uncertainty in industry of, well, the future and their investments. So the investment climate for industry to you know, are we still gonna be there in ten years? Is holds them back a little bit to electrify.

So you almost get a chicken and egg situation because there they can generate the demand, but there's uncertainty there, which means there's gonna be uncertainty in the renewable projects such as wind offshore, which is really, for the Netherlands, the biggest source for, electro electrification of industry

And also for our hydrogen market. And so none of them is moving. So one has to move first, and that is typically what we see in the Netherlands.

I think it's a really nice, description of kind of the log jam a little bit that's in power markets at the moment. And you just brought in the the Netherlands, so let's let's do that. Let's talk about how the power markets work in the Netherlands.

Yeah. I would say let me let me say a little bit about market design, so it's it's more technical. And then what does that mean for us as as a Dutch energy company operating in it? So the Dutch electricity market is liberalized.

It means production, trade, and transport of electricity are separated, and companies can can freely, compete in this market. And the most important market in Netherlands is day ahead, and most electricity is traded through that market. And companies exchange their bids in advance and then, you know, it gets settled. Tenet, the Dutch transmission system operator, ensures that supply and demand obviously are matched, and the parties must predict upfront how much they will supply and consume.

So we are responsible for that ourselves, and the deviations are settled afterwards in the imbalance market, which we can bid on quarterly. Prices are determined per hour for the day ahead, and they can fluctuate greatly depending on, basically, the weather, if the sun shines and the and the wind blows, and also by international electricity flows because the Netherlands is very connected. Saying that, it means that we are strongly connected to our neighboring countries of Belgium and Germany, but also UK. We trade electricity international in that way.

So that's a bit of a description of the Dutch market. Okay. Now what does it mean to operate in there? It's a very small market.

We're a densely populated country, but geo geographically, we're we're small.

And in the the Netherlands, what does sort of what does peak demand look like? What does the generation mix look like?

Yeah. The the peak demand would be about eighteen gigawatts, and the mix of that is, like, fifty percent renewable. And the peak demand is is predicted to grow in in the coming five years to about twenty one, twenty two gigawatts.

Okay. Very interesting. And then, obviously, your focus is on asset management. So what is the latest in this sort of power purchase agreement and flexibility markets in the Netherlands?

Most of our renewable sources, we actually only build them at build them at the moment if there's a PPA connected, and that could that's usually b two b because it's larger volume. So the big the Googles, the Amazons of this world And we we supply b to b mainly for our renewable assets. That is just literally for more security of the investment.

Okay. I definitely saw something recently where, Anecco had been providing something to Google as part of a, PPA for one of their data centers that they're looking to put in the Netherlands, which is Yeah.

Early on in time, we we used to have a lot of merchant projects.

But I think in the last five years, we we had none of them. And we all we actually only build, especially the larger wind offshore.

It's a prerequisite that we have, that we have a good PPA in place before we even take FID.

And that's true for you, but is that also true for the general market? So many fewer sites coming through on a merchant basis.

Yeah. I would say so. Especially Netherlands, Germany, we see the same. Because, yeah, you you just see that the the the needed curtailment at times, you need to have certainty of your of your power being, supplied to somewhere. Because I said before that the the the demand is stagnating a little bit, so it's harder to really make sure that you do find an off taker of your power at the moment.

Yes. And I suppose, is that also true across Europe as well because you're active in multiple regions?

Yeah. We see the same in Germany and Belgium and also in the UK. We we see the same. We won't build, for example, a new wind development in Scotland without being very, very certain that we have a PPA in place.

I almost thought you were gonna say we won't build it unless it's colocated with storage.

That's the second point.

Which probably brings me on to the flexibility side. So how how do you see that colocation?

Yeah. So that's that's another trend we see definitely operating in our geographies. Almost everywhere, we see that we shift towards colocation. And I see two types of colocation.

The most common one that that jumps to mind is to put a battery next to your, wind farm or put a battery next to your solar farm. Because what we're actually doing right now is we're throwing away beautiful renewable electricity that we generate half of the time because it's just not needed at the time that it's actually being generated. Because sun and wind usually during the day, we come home, and we want to charge our car in the evening. So you need to prevent that you throw that energy away and batteries flex is the best way to do that.

But if you talk about really congested places such as the Netherlands, like Port of Rotterdam, for an example, large wind offshore gigawatts of electricity are gonna land there. And to prevent that, you need to make really big grid fortifications. You could think putting an electron sink right close to where where the electricity lands, use it close to where it's being generated, is another form of colocation. And we're increasingly looking at our portfolio in this way.

How can we combine electron sinks Yes.

With electron generation just because the fact that demand is stagnating, and this is also a way to create demand and therefore build a bit more, well, positive business case for example, wind offshore.

And I think we're seeing this in loads of regions. So as we start to kind of grow the generation mix as adding wind and solar and demand is starting to move in some in some places, grid doesn't necessarily always keep up. And so that kind of bites in two places. You kind of get this lack of connection offers, but then you also get this, these constraints kind of emerging on the grid, which means even if you have the generation, can't get it to where you want to get it to. And so from your side, you're both perhaps is is a question, but on one side, you're thinking about, okay, where can we put our battery and our flexibility so that we can make the most of the sites? Is it more being driven by that or or are you also seeing the sort of the problem that is everywhere, which is I just can't get grid connections fast enough? And so if I want to deploy storage, then I kind of have to blend it with solar or wind when I put those sites onto the onto the grid.

Yeah. We see both. I think talking about batteries, the issue in the Netherlands is mainly grid cost, grid fees, because we have a slightly different system of socializing, grid cost in the Netherlands, which leads to very high grid tariffs. And they are charged because the battery is seen as a user, whereas I fundamentally believe that a battery should be part of the electricity system of the power system because it actually helps.

So in the Netherlands, cost usually is the issue for battery. And in Germany and Belgium, we see that we're we are building batteries, and we usually find ways to get the connection. It it has waiting times, but not out of proportions. Whereas the UK is obviously much further into battery development, and you you guys have a different situation.

Yeah. We we are gonna do a podcast on connection timelines in the UK. We will be here for a couple of hours. I'm I'm I'm sure.

Yeah. And and something that's maybe interesting for you is in the Netherlands, we have we have a type of, a contract with the with the TSO. It's a non firm ATO. And what it means is you actually say, okay.

About eighty five percent of time, you're completely certain that you can get you can use your connection to to to take or give power to the grid with with your battery. And fifteen percent of time, the TSO can say, no. We're full or we're congested. And those, contracts, grid connections are fairly easy to get.

And they also make sure that some of these battery business cases are now moving moving towards more positive because you can actually get the connection.

Yes. And I think for if you're a data center and somebody says, by the way, it's eighty five percent firm, they'll go, well, no. Thank you. I can't do that.

But a battery provided that sort of firmness is at the right times is is just absolutely not a problem. I think we also see some exciting things for example in the US in SPP, is one of the regions in the US. You can also have sort of accelerated timelines if you're looking to colocate rather than getting a, just if you're looking to add on batteries to an existing site rather than bring a new site through. And I think there's a few things like that where grid operators might want to think about how do they get these flexible assets that actually help the system onto the system faster.

And and but both those are really kind of, I I suppose, good examples of that. To kind of flip this round to to look at the consumer side for the Netherlands, How do we change costs? So how do we lower costs for consumers in the Netherlands?

Yeah. This is a big thing. Consumers being both businesses, industry, and and actual, like, us end users. I think one of the big things in the Netherlands is the grid fees, as I just said. They're they're huge, and the net requires more expansions over the coming years. And what we do now is we don't socialize the cost for the current and the future users, but we actually charge them to the existing users, which makes it very high grid terror. So for example, if you wanna build a an electrolyzer to make green hydrogen, about fifty percent of the cost of it is power Opex.

So that makes it almost impossible to even start your project. So both industry themselves, if they want to electrify, it means they'll use electricity, but their grid fees, of course, will be proportionally proportionally increased. So it it halters the case for electrification. So it's it's actually a double break. There's the net congestion, and then there's the grid fees, and it's it's completely holding back the demand development in the Netherlands that we so much need to go from fifty percent renewables to to even a bigger share.

Yeah. And I I suppose there's kind of a really interesting part in that where if your grid fees become a larger amount and then people start to just go, well, look. The these grid fees are very expensive. I can get solar panels.

I can get a battery. I can put it on my own factory. I can put it on my own industrial side, and I can avoid those grid fees by having my own generation on-site. Then all of a sudden, you're seeing less volume coming through the network.

And, again, it then starts to because that's a fixed cost, the cost of the network that then starts to become a a higher and higher cost for all of the rest of the people still connected to the network. And so it's kind of the theme of this whole conversation, I think, so so far is we've got this element of where which way are we going? Are we gonna are we gonna be able to release some of those good fees by having more demand, by by having more flexibility and and sort of get those grid fees down? Or there's there's there's sort of the spiral of kind of, much higher costs as people look to leave the network.

Do you I mean, how much of the behind the meter generation do you see coming through in the Netherlands? Is it is it a big trend?

It's growing, in terms of what Eneco develops. In Belgium, we're really big at that. So our b two b portfolio is really all about developing solutions for companies like Volvo Truck. They built, electric trucks in, in Belgium, and we have their a couple of wind turbines, all their roofs covered with solar panels, and and we we help them optimize power. So in Belgium, our portfolio b to b is is very big. In the Netherlands, we're setting this up, and we're looking mainly at the midsized company, and we have an offer called green building, we call it. And we help smaller, medium sized businesses to to really optimize their their energy use for their for their building or their offices.

So that's growing, and we see a lot of behind the meter projects actually still, very good in terms of returns. So that that's where we're going. And as you said, we do need it because I really believe that local solutions are re are part of the solution. So the role of customers in flexing and preventing unnecessary and expensive grid expansions balanced with, okay, how do we socialize the cost of the existing grid expansions, which we do need?

So it's that's really a balance that we need to look at. And I think it it requires a a bit of smart thinking with multiple parties, about the grid design locally. So local solutions, come together locally with a community, with a province, with a with a TSO, DSO, and an energy producer. And you can find really brilliant solutions that prevent expensive, well, grid building, because you find other solutions.

So I do think behind the meter batteries, generation is very, very important, but you have to make sure that you you coordinate it and and you don't build a a big grid next door.

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Enjoy the conversation.

And I suppose there are a few sort of emerging technologies, would say. Not so much emerging, but you've got things like vehicle to grid. You've got community batteries. You also mentioned sort of hydrogen projects coming through. Of those kind of, like, a portfolio of a few things coming through at the same time, which of those are you sort of most bullish on? Which do you sort of like like the most as a as a new tech?

I would say batteries is for us the most important, but it's a it's a combination of digitalization on our end. So we have a large VPP, virtual power plant, that actually connects all our assets and then optimizes curtailment use, where does the electricity go, where is it generated. So it's it's like our back office is is, innovated in that way. But on the other side, as I said before, I think the trick is into balancing generation and use, either by colocation or by thinking smartly about offers that you can have.

So just building renewable assets, that was that was ten years ago. That was really good to get us where we are. But right now, we need to think how can we create a network that that prevents expensive grid fortifications by by coming up with smart stuff. So so dynamic pricing, for example.

We have a we have a small customer group that's really active, and they like it. They like to see that, that they can charge their car for lower prices because because of the dynamic price pricing or that, they they switch their washing machine on when when when power is cheap. Those are the front runners. Not everybody likes that, but I think the role of the of the consumer is heavily underestimated in solving this issue.

So any offer that is aimed there, dynamic pricing, emobility, how can we combine emobility with with a smart grid in a in a in a town or in a in an area? But for example, we also look bigger. If if I look at the national grid in the Netherlands, something we do is we help the port electrify. So we call it shore power.

Where the the big ships come in, and they don't, you know, use their diesel to to while they're docked and while they're loaded, but we plug them in. There's literally a big plug that goes in, and they they are connected to the electricity grid. And it helps reduce emissions in shipping industry. But it's also a very handy electron sink where you have wind onshore, landing.

So and another good example that we do is, we call our our business part that's called AgroEnergy. We the the Netherlands has a really big, industry in terms of the greenhouses, and we work with a lot of, greenhouse companies to see how can we optimize their, heating, and their energy use smartly because it's also an electron sync together with behind the meter solutions or VPP use. So those are actually colocation, but in the bigger sense of the word.

I'm not sure whether an energy historian would correct me on this, but I think that a lot of the first aggregation and VPP type technologies that came in GB in the sort of mid teens actually had track records from working with those greenhouses and the CHPs in the Netherlands. And that was actually part of the the sort of where the technology originally came from. So you you sort of lent it to us. We took that in and brought it through in terms of battery optimization, whatever it might be. And now I think it's perhaps coming sort of back full circle as well as as GB starts to export a lot of what we've done in the battery space back to the continent.

So, there's definitely And VPP space, obviously, Kraken is a is a really good example.

But, there there are more solutions, and I think our VPP that we developed in house is a similar system, very, very strong in in optimization of of flex, but also just optimization of the of the trading, part.

Okay. So we've we've jumped about in this a little bit. So we've we've talked about electrification reports. We've talked about VTG.

We have talked about community batteries. We've mentioned hydrogen very briefly. I I I'd we've yeah. We've we've covered a lot of these individual parts, but I I I want to kinda come back to that sort of fundamental.

So how are you positioning an echo as markets evolve? That much more general question because it feels like you're in loads of places. You obviously oversee all of these sort of the assets and the strategy around those assets. So how do you kind of keep a vision?

Because that is so many things to be looking at.

Yeah. And I think if I zoom out completely, that the starting point of of it is that since two thousand seven, we had a very brave CEO, and he said, we're gonna go all renewables. And the whole country said, well, this company's crazy. It's gonna go down.

And we're still here, and we actually showed that that you can do that. We made it work, and we found our niche in that. So that's the starting point. And we sort of wrote that up in in a plan called the OPP, the one planet plan, we call it.

That's actually why people come to work with us because it's it's quite famous in the Netherlands. What the OPP does, it says how we feel that we should treat each other and the earth.

So it's also about, energy poverty. It's about the social aspect of of being a company, so it's more ESG related. But the bigger part of it is climate, and we set really strong ambitions to be climate neutral in twenty thirty five. We're actually biodiversity, net plus, so a hundred and ten percent better for each project since twenty twenty five, and circularity, completely circular in twenty fifty.

So that's the starting point of everything we do. That's that's embedded in our strategy since twenty nineteen. And, also, we get well, our KPIs, OKRs, if you want Are on that. So I have especially in my area, the assets, I have to be mindful of emissions.

Yeah. So that's the starting point. Then then you go into the energy transition where at first it was build, build, build, and that was easy. Right?

Fairly simple. Now we come where that doesn't work anymore. So you can just see that returns, which are still important for our shareholder, are declining. It's a massive, capital intensive industry, the the asset business.

So how do you deal with making sure that the returns are still, in line with the risk that you take. So then the answer is you you must have a balanced portfolio, which is our strength. Right? We have assets, integrations of trade, and customers.

So by nature, our portfolio is very resilient for, well, for all seasons. So that's that's how we look at it. And now we're coming to a point where we say we must go one level up in this thinking. So how do we design a portfolio that is, still growing, resilient in terms of well, look at the energy crisis.

Right? The energy crisis, Gasflex and renewables together actually caused us to to steer through it really, really nicely. So resilience in your portfolio and be ready for for any, well, any extremity helps a lot. So the things I look at mostly when I look at the whole portfolio is how do we still go towards decarbonizing the system, and how do we do whatever we do in line of that?

So first, strategic fit. Then it is how do we optimize capital because it is capital intensive, and you could spend it. Yeah. You could spend your capital on many things.

So capital optimization, which is return versus risk or return versus, resilience of your portfolio.

And then I think the last thing is how do we deal with the actualities in the market? Net congestion, you know, what you thought on paper actually doesn't work, so you have to, on the ground, optimize your portfolio, and then you move towards what kind of offers, propositions, business models do we look to to invest that capital, which has shifted from, you know, just build wind farms, towards smart colocation, sinks, and, energy production, etcetera. So it's actually a three step approach, if I could describe it.

Yeah. I'd I'd actually really like that. So I really like the sort of the the first element, is sort of the vision and the strategy. The second element, which is do you sort of mentioned it a few times in there, but the the the resilience element. So I think often people sort of look at solar or wind or battery storage and somebody sort of starts mentioning that sort of levelized cost of energy and you think, well, that's that's lovely. But in fact, in reality, when you're managing a portfolio of this, the resilience and your independence from gas prices from other parts of the world, that becomes a really sort of critical part of how you actually deliver on this strategy and how you kind of keep shareholders happy with with with sort of at at at the same time as making the transition, you are also making a more resilient portfolio. I think it's a really nice way of sort of of positioning it.

Yeah. And imagine we're trying to use a grid that was designed for gas flex, basically, our coal to fire whenever it was needed, and we're trying to use that grid how it was designed for a bunch of renewables that do what they do. Right? They they the the sun doesn't always shine. You have a day and night rhythm, the wind. So also geographical optimization becomes important Of your portfolio.

And I think you have with such a large portfolio with all these assets within it, you now have some new additions coming in. So utility scale batteries are coming in. How do you think about those? What are the best markets for you?

Well, utility scale batteries are extremely important for our portfolio, especially since the the the amount of renewables in the mix is is current in the Netherlands at fifty, it's gonna go up more. So, inherently, you're gonna have an energy production that is that is not flat. So you need batteries. You need flex.

So short term flex, which is batteries, long term flex, which at the moment is only gas flex. Right? Hydrogen isn't working yet. Long duration energy storage is not viable.

So we need those two types of flex. The hourly flex, which is batteries, and then the the actual flex, that you can you can you can battle a Dunkelflaute with, which means Dunkelflaute. I don't know if everybody knows what it is, but it means, there is actually no energy production from the renewables, and and you need something else in that case.

So we use batteries to to balance our own portfolio of sustainable, assets. So we we use the VPP for that. But I also think they're essential, especially in the Netherlands with grid congestion and also optimizing grid expansions to balance the grid. So they have a double function. So I strongly believe you need you need to put them where they're needed, not just put them to put them, which is a big discussion in the Netherlands where where a lot of connections or or applications for for batteries are I I think they're in the wrong place. So, again, searching for local solutions and talking to each other instead of just doing what you did for the last, I don't know, fifty years is is really essential.

So I I really like the description you have of how you're adding those batteries both to deal with the sort of variation in terms of generation, but also calling for transparency on networks in terms of where there are pinch points, where there are high cost parts for the network, and how batteries can help to resolve those.

Yeah. I suppose The funny thing is we need them a lot in the Netherlands, but it's completely stagnating. So Okay. Currently, my portfolio is building big projects in in Germany.

We just took FID on on two big batteries. And also in Belgium, build a big battery, and and another two FIDs are coming up. In the Netherlands, we only have one in our portfolio, and that sort of stumbled through the the hurdle rates so so to get enough returns just because it's sharing a grid connection with one of our power plants. So we need them a lot, but, due to the grid fees again, it's it's very difficult to, to actually get these business cases to to a level where it's acceptable, for the shareholder and and ready to invest.

And so this is batteries essentially facing grid fees that don't really welcome the flexibility that that battery brings, and that means that those batteries are, as you say, less attractive in comparison to building a site in Germany or building a site in Belgium.

Yeah. Because the Dutch energy system sees them like users. Whereas in Belgium, you get and in Germany discounts to grid tariffs because they're helping. And in an analyst, well, you're a user of the grid, so you have to pay the tariffs.

Whereas I would say no, make it part of the grid Yeah.

And then you can reduce the tariffs for everyone.

And this conversation is happening everywhere. So grid designs, grid tariffs are generally made, as you say, in the world of GasFlex or or consumers just having twenty four seven baseload, whatever it might be. And actually, the the the flexibility that batteries can bring to those networks genuinely isn't really factored into those charges. And so we're seeing that same conversation happening or, yeah, all over the globe actually, which is really interesting. You mentioned one thing about there being variations in generation and then you also mentioned there being constraints. Interested that you didn't mention demand and I I I wonder if we think about the port of Rostan which you brought up earlier, the demand for that site must be all over the place in terms of as large ships come in. Do you see there's a role in terms of some of those large scale batteries being sort of alongside the port as well?

Yeah. The the battery that we're currently looking at at our power plant is in the port.

Okay.

So that's that's very useful there. The so the port has some really good opportunities, which is shore power, for example, but also is very much under threat because the big refineries are in the port. They can electrify, partly, but also they are in a situation in the European, well, industry politics and say, do we need this? Where do we need it?

So there's a lot of uncertainty in the port, and I think the port needs to look for new solutions of, baseload. So I'm thinking data centers, energy hubs, where the wind lands. So so shore power is good for that. But, again, in the port, it's where where we would hope demand would pick up in terms of electrification.

But the companies that need to electrify are usually big multinationals, and they see their investments really somewhere else at the moment because there's just a lot of uncertainty about industry and the future of industry, especially under ETS and and under Europe, whereas the the Draghi report clearly suggests that we should we should treasure our industry and and help it. I see, especially the Netherlands, mainly, around with sticks where the where the Germans are are a bit more generous with their carrots, and and therefore, you can see that stuff starting to pick up, including hydrogen.

And to and to kind of have that theme running all the way back through again, you absolutely have to have large industry, large demand to be able to share out some of the fixed costs. And if you don't have those things, then you start to get decreasing demand which raises higher costs on the remaining consumers, which means higher costs while lower growth. And so you can see how there's a lot of these feedback loops within some of these parts of industry. And that's why it's so important, I think, to have, as you say, almost like a a carat based approach where you're encouraging demand to come onto these these these systems.

Yeah. Yeah. We have a seventy five gigawatt offshore ambition. That's really far out, though. But it should be at least twenty one gigawatts in in twenty thirty.

We're we're never gonna make that at the pace we're going right now because demand is not coming so that every business case for the tenders the last tender was published yesterday. No bids. So I'm really concerned about wind offshore generating the demand because imagine, it's a it's a eight to ten years pipeline.

Right? So right now, the business case doesn't fly.

But it means that's a park. That's that's a farm that's built in eight years from now.

And then the demand might be there. But if we wake up then, then we still need eight years to actually build it. So the the mechanism to make sure that we take away the big risk for these for these projects to be built by, well, by us, by the developers is, for instance, an an SDE plus plus or or a a contract for difference like you see in Belgium. The Netherlands is very hesitant with offering contract for difference. I think we need it, one, to not stop, to to not create a stop and go in the supply chain of wind offshore because it means companies will go away, and you won't build them because they'll go somewhere else. And two, to make sure that when the demand rises, we we have what we have. So you need to look forward instead of where are we now.

And we we see a lot of that narrative, like, what's happening in Netherlands mirrors GB. So we're going through this process at the moment. We're trying to hit clean power twenty thirty. We've just had an allocation round, so we're coming up to an allocation round seven. I'm sorry. This is recorded on the thirty first of October.

So we haven't had allocation round seven yet, but we have seen the budget for it. And the budget for it is not really procuring as much volume as the kind of larger plan for Clean Power twenty thirty said. So we've kind of as you say, we should be thinking with an eight or ten year hat on, but we are stumbling at the moment on just sort of making those costs and making those risks work to try and encourage people to come and build those offshore wind sites.

Yeah. But I think that's very similar in the Netherlands. The the the TSO is expecting a shocking ten gigawatts of batteries in twenty thirty three to stabilize our system. And at the moment, we're struggling to build the first ones, as I said, due to to the business case. And the same for wind offshore. The agenda is very ambitious, but the tenders are or there's no bidders. So we really have to redesign and rethink where are we and how do we get demand going, because that's that's really tool that will unlock all the rest.

And there's almost like, with some of the some of the areas that haven't yet had as large a fleet of battery storage installed, there is something of a second mover advantage. So if I look at, say, California and and Kaiso, so the the, description of their system, they have something like thirteen gigs but fifty gigawatt hours of battery storage already there. So the so the blueprint of how to build these very large battery sites already exists. And so it's not a sort of technological hurdle around this. It's absolutely doable. As you say, it kinda comes down to derisking the investment and making sure that we're kind of we have the connections available.

Yes. And in the Netherlands, it's space.

Okay.

Because we're very densely populated. I in the US, you can, you know, you can find an empty space and build a data center with a little, you know, a gas turbine with it or in the Netherlands, you have to really search for space.

Okay.

That that's a that's a extra complexity.

That is. That is. So you obviously oversee a very large portfolio, perhaps putting, one of your sort of senior management hats on. Like, what are the sort of top risks in that portfolio today?

I would say volatility is is a big risk, which we're managing by ensuring we have enough flex.

And that's also why we look at resilience. It's also exposure because due to the volatility, the the price ranges are massive. So you you you look at exposure, and how to protect from that. I think it's building a resilient portfolio and being an integrated energy company.

Okay. And so in some senses, this is around neg the growth of negative prices within Europe. And so if you go back to, say, twenty twenty two, you'd be worried about volatility in terms of very peaky prices. In this case, just I suppose you're talking about very negative prices from a generation perspective.

Yeah. And and yes. And and, of course, the risk we all mentioned, the increasing cost of the grid, which is hampering a lot demand, basically, and congestion. So cost and congestion are are more more inside out or outside in risks. Yeah. And the so you have the the contextual risks of the country or the market that are slightly different per geography where we operate. But and then we have the inherent portfolio risks, which is, you know, that portfolio responds to to price, to volatility, and to exposure because that's in the end, if you're a big asset company, the what you do is manage risk.

But for me, I would say risks are always opportunities. So higher volatility for me means we should invest in flex. Demand stake state stagnation means we need to look at electron sinks. So shore power, emobility, and and and find balance in our portfolio, data centers.

How do we how do we manage in the Netherlands, a wind offshore electron generation with a data center baseload? And net congestion really leads to looking at colocation and looking at electron sinks next to where you produce. So you really prevent extra grid fortifications and and vertical integration at a country level. So how are we a bit smarter with our grid?

So all these risks for me are opportunities for the next five to ten years. And one other thing to mention, I think for us, the the demand risk. We are, at the same time, trying to create the demand as fill the demand. And I think a really good example is industrial electrification.

So we we try to look at at companies that need power at a certain time of day, not baseload, but actually flex. So we say, okay. When power prices are low, your whatever french fries factory or or drinks factory switches from, gas fired to to electrical or or other heat solutions. So it's heat storage, industrial heat storage And literally a heat an eboiler. So for Heineken, Dutch company, Dutch brewer, we build a a big eboiler in their in their process, and it fires when electricity prices are low. And when electricity prices are high, they use their normal system. And and the business case of those are are very, very positive.

And I think there is a massive lesson in there in terms of trying to work out ways of getting industrial scale flex through.

All of that comes from good transparency on pricing, the the ability to be able to expose those end customers to those very peak prices or those very low prices so they can make decisions around flexing how they how they run their plant.

Yeah. And if you make enough of that, you can actually help flex the grid. There's some industry that that's less flexible, I would say. Big refineries are are less flexible.

They they they have a turndown turndown rate of about ten percent. They can flex ten ten percent. Otherwise, the the process doesn't work anymore. But short power, eboilers in an industrial process that has an alternative, they're very good sources of flex.

And I think this has been for listeners, I think it's a fantastic sort of oversight and sort of getting also also, like, underneath the bonnet of, like, how a really large utility thinks about some of these transition themes. And also, as you say, how you're making opportunities out of some of the risks as well. I think that's a it's a really nice framing, and and I I hope that there are a lot of people listening to that who will think, yeah. Okay. I love that. I'm gonna be taking that to my next board meeting.

May maybe they'll be quoting you, Karen. We'll we'll we'll see. So that that brings me on to my my final two questions that I would like to ask. So the first one is, is there anything in particular that you would like to plug?

Yeah. I would say it's two things I would like to plug. One is just very personal. I'm a I'm a very avid mountaineer. And last years, I come into the mountains, and I literally see the glaciers melt. From every year I go to Italy to the Nefetti Hut, it's they have a ladder to get into the hut where you used to be able to step from the glacier into the hut. Every year I get there, a new piece is added, and now it's actually a very scary thirty meter climb.

And and I see this, and it it makes me incredibly sad because this is you know, it's irreversible. And and my concern for for the climate and for this earth that we have to pass on to next generation is is why I do what I do. And I can't stress enough that it's it's two to twelve or maybe it's already too past twelve for this problem. And climate and and the energy transition seems to have become less important to many people, including politicians.

And it's the time to reverse course. And the the energy transition is it's literally hitting a little speed bump because of everything we discussed today. You know, demand's not going where we want it to be, grid congestion, grid cost. But there's still what I would like to say is there's still many things we can do to make progress and and to find support into into smaller solutions.

We we can do things. And the great thing about that is, like, secondary to it is sustainable energy doesn't just make our lives better as in the climate, but it also helps in terms of energy independence. And that's a big theme at the moment in Europe, which is a for me, it's like a way to a secondary theme to say, well, if we find that important Then we can push the climate agenda a little bit. So we we shift to, autonomy as a as a first argument, but then it has energy transition in its wake, which is very good.

Yeah.

I'd like so so here, I totally agree with everything you've just said. And I think maybe I'll add one thing to it, which is that if if you're thinking about the plans coming through, there is both a need to think about the eight to ten year horizon and maybe that sort of offshore wind plan that's coming through. But there's also I think there would be great if industry has sort of healthy skepticism of of sort of stuff coming through in twenty forty plus. You know, this isn't an issue that we have ten years to sit on and then make a decision on. Actually, the run hours for the gas fleet, the run hours for the coal fleet, whatever that might be, we need to bring that down ASAP, make the savings as quickly as we can. We don't need to get to a hundred percent renewable tomorrow If we could just shift the dial in terms of the the renewable penetration in many grids, that would make a huge difference.

Yeah. And I think trying to go to zero fossils, fossil fuels is is gonna be hugely expensive. But if you go to ninety percent, for example, and you accept a little bit of fossil fuel in the mix, you can do way more. Yeah. Because you can you can invest your money not in that last ten percent that's very difficult to abate, but decarbonize customers or or other solutions. So that's very important.

Okay. And I I you said you had another one to plug.

Yeah. That's it's just something I want to share because it's so cool at what what we do at NACO. I told you about biodiversity. So since this year, every single one of our projects has to leave the place where we build it, ten percent better in terms of biodiversity than when we found it.

So all our projects contribute positively to biodiversity. And this this goes from in a city in the Netherlands where we build a heat station to to distribute heat. We also have to leave biodiversity better in the middle of the city. So what we did is we talked to the council, and we said, what what do you need?

And they said, well, you guys have an ecologist. We have actually our own ecologist at Enoko or two, actually. And we said, well, let's have a look. And we built a citywide plan to to increase biodiversity over the city for them in return.

Another great one is we built three turbines or we didn't build three turbines, actually, in in a place in the Netherlands because there's a nearby gathering gathering place of of a special bird. And we said, well, we want to build turbines here, but we will never be able to protect this bird. So biodiversity would go down. So we don't take the investment decision.

We leave it. Okay. And that's that's really cool that we look at it this way.

Which is the city you were looking at in the first example?

Schiedam.

Okay.

So the Netherlands. Yep.

If you are walking around there and you see additional biodiversity then If you see new trees and plants and and stuff coming up, it's it's probably because we helped designed where to put what in the best way, in town.

I love that. And then, moving on. So your final question, is there a contrarian view that you hold?

Yeah. I thought about it last night, and I actually had three, and maybe I'll I'll tell you them, and then we dive into one that that excites you most. I would say, and maybe it's not contrarian because the world picked up, but I would say flexibility and decentralization are underestimated, in terms of looking at the grid, and this is maybe more so for the Netherlands.

The second one, I think we all know it, but we're still not acting, is the the role of consumers or prosumers is fundamentally underestimated in how we do what we do. So we're still looking at the big projects, but we don't really get the the the the latent flex that we have in all of our our networks. I think the UK is ahead, though. And the last one is maybe the most interesting one.

Renewables is not always the cheapest choice on the short term, so you need to look at total cost of ownership and longer term. And and I think we touched upon it already. Right? You need to have this eight to ten year hat on.

So those are a couple of views that I thought, well, they're they are they're not unknown, but somehow they don't get enough traction.

Agreed. I I think I think the last one is is perhaps my my favorite, which is that I think it is kind of calling for and and you mentioned it a little bit earlier that actually in a lot of this transition, people appear to have forgotten about some things. They appear to have forgotten about the progress we're trying to make and and where we're trying to get that system to in terms of resilience and independence. And actually, it is refreshing to hear that twenty thirty five plan, how you are executing it, and how you have that longer term vision. So I love that as a as a contrarian view. I suppose how how do you embody that in a sort of day to day within your role?

Yeah. Especially in the Netherlands, the the the simple thought is renewable energy is always cheaper, and that's a logical future.

I believe that, but I also believe we do need a for example, we need a little bit of fossil In the mix. So for example, if you say everything needs to decarbonize at the same time, so society and the power plants, you make your life incredibly difficult. Whereas if you would say, do it staggered, keep the power plants on a little bit longer, it's a tiny bit of c o two because they have, what, thousand run hours a year, and then you can decarbonize a much larger part of society. So it's thinking about it with a bit more nuance, and say, if we if you just push for renewables and say, well, all power plants must be hydrogen fired The country will go bankrupt.

And if you accept that there is a place for a little bit of fossil fuels for a way longer time than we expected initially. And there's a bunch of reports, recent McKinsey report as well, suggesting that this is where we are. So, yes, renewables is the way to go, but a little bit more nuanced and across the board cut through and and kind of almost step over some of the more logical short term solutions that include, c o two capture and storage, power plants versus the rest of the landscape, net optimization, system costs. So in the short term, variable renewable sources often cause additional system costs.

We know this, balancing congestion, extra infrastructure. And then we almost forget that we can think of hybrid solutions. And for me, hybrid solutions, if I talk talk to my colleagues at at Khosuni, the the state owned, gas distribute distributor, we we actually agree wholeheartedly that hybrid solutions are the are the future. Like the ones I talked about before at Heineken.

They have their normal system, and they have an eboiler. And the the total cost versus how much emission you save is massive In the first step. So, yes, renewables, but I think as a sort of intermediate step, think about hybrid solutions. Think about blue hydrogen before green.

You know? Yep. So it's it's almost like, are you very dogmatic about it or pragmatic about climate change?

That's that that is a perfect place to end it. And and when we started this conversation, it was cloudy and rainy outside and I think it was all a bit downbeat. And as we've kind of gone through this very wide ranging but extremely pragmatic approach to managing these very large investments, but also how do we get the sort of best out of this for consumers and lowering costs having more independence and resilience. The sun has come out and so I feel like that's a very nice analogy for the conversation we've just had. Karen, thank you for coming on.

Yeah. Thanks so much for having me.