Berlin The electricity network operator Tennet wants to massively increase its investments in the expansion of the networks. “We invested 4.5 billion euros last year. We want to increase this value to at least eight billion euros this year and thus almost double it,” CFO Arina Freitag told the Handelsblatt. Freitag put the investment requirements for the next ten years at 111 billion euros. According to their information, around 60 percent of this is in Germany and around 40 percent in the Netherlands.
Freitag said the grid expansion represents a “task of the century”. The Dutch company is one of the largest investors in the European energy transition. In Germany alone, Tennet says it has invested more than 21 billion euros in network infrastructure since 2011.
But the development is constantly accelerating. In 2018, the ten-year investment agenda included only 28 billion euros. In April 2022 it was 60 billion, in September 2022 it was 70 billion and in November last year it was already 89 billion euros.
The background to this is the requirements for the expansion of the electricity transmission grids, which have increased significantly again, especially after Russia’s attack on Ukraine. The aim of the EU is to reduce dependence on energy imports as quickly as possible. One key to this is the rapid expansion of renewable energies.
This shifts the focus of power generation further to the north and north-east of Germany. Additional lines are required to transport the wind power produced there to the consumption centers in the south and west of the country. Tennet is also responsible for a large part of the grid connection for the offshore wind farms in the North Sea.
“Fair market price” is essential
The dramatically increasing need for investment calls the current ownership structure into question. Tennet Germany is a wholly owned subsidiary of Tennet Holding based in Arnhem, which is wholly owned by the Dutch state. In addition to 50Hertz, Amprion and Transnet BW, the company is one of the four transmission system operators in Germany.
Tennet and the Dutch government are currently negotiating with the federal government about the sale of the German subsidiary. Freitag said the talks were just beginning, “but they are going very constructively”. The aim is to “create two strong national players who will work closely together to further advance the energy transition”. With the entry of the German state, there is an opportunity to secure long-term investment needs both in Germany and in the Netherlands.
However, a “fair market price” is “a very central issue” for the sale, emphasized CFO Freitag. According to them, the company needs “ten billion euros in equity in the Netherlands and 15 billion euros in Germany”.
>> Read also: Europe’s green mega-project: A complete network infrastructure for hydrogen is to be created in the North Sea
From the point of view of the management, a state commitment would have clear advantages compared to the entry of a private investor in view of the upcoming challenges: “We are talking about investment volumes that require a resilient solution for the coming years. Investors have to make long-term commitments accordingly,” said Freitag. “With the German state, we would have a shareholder who stands for exactly that.”
“We invested 4.5 billion euros last year. We want to increase this value to at least eight billion euros this year and thus almost double it,” Freitag told the Handelsblatt.
(Photo: Tannet)
Both the Netherlands and Germany, as shareholders, are guarantors of a good credit rating. This reduces financing costs and helps to dampen the economic costs of expanding the network.
Federal Minister of Economics Robert Habeck (Greens) resumed talks about the federal government joining Tennet at the end of last year. He hopes that by getting involved, he will be able to increase his influence on the company and drive forward the network expansion that has been sluggish for years.
Selling is the “preferred scenario”
The Dutch had bought Eon’s transmission network subsidiary in 2010. This created the first cross-border electricity transmission system operator. Tennet has repeatedly emphasized that it is making an important contribution to the integration of the European electricity markets.
In the meantime, however, the Dutch are no longer willing to finance the expansion of the grid in Germany. In a letter from the responsible minister to the parliament in The Hague at the end of February, it is said that a complete sale of Tennet Germany to the German state is “the preferred scenario” from the government’s point of view.
>> Read also: Tennet wants to sell the German subsidiary completely to the federal government
The management emphasizes that there will also be cooperation between the Dutch and German network operators in the future, regardless of the question of ownership: “We have to preserve the synergies. This applies in particular to the offshore sector,” said Freitag. That is why it is important to conclude a cooperation agreement. In this way, the positive effects of cross-border cooperation could be maintained and expanded. “This applies in particular with regard to purchasing and technical innovations. We want to continue to work together here in the future,” said Freitag.
Tennet’s management is critical of further political considerations aimed at bringing together the four electricity transmission system operators in Germany under the umbrella of a “Deutsche Netz AG” with state participation. “Our major task is to advance the energy transition. We want to fully focus on that instead of having to deal with the question of how we could reorganize ourselves,” Chief Operating Officer Tim Meyerjürgens told Handelsblatt. “That ties up personnel and time.”
“Our major task is to advance the energy transition. We want to fully focus on that instead of having to deal with the question of how we could reorganize ourselves,” Meyerjürgens told the Handelsblatt.
(Photo: Tennet)
For Tennet, one of the major challenges of the coming years is the grid connection of wind farms in the Dutch and German North Sea. The company will connect a total of 40 gigawatts of offshore wind power capacity in the Netherlands and Germany by 2030. To illustrate: This roughly corresponds to the installed capacity of 40 nuclear power plants.
Tennet is now using a new connection system that can be used to connect larger wind farms. The bottom line is that this should be more efficient and environmentally friendly because fewer cables have to be laid and fewer platforms have to be set up.
With regard to the resilience of the power supply system, Meyerjürgens is confident. “Last year the situation was tense due to the gas shortage, the drought and the problems with the French nuclear power plants,” he said.
Measures have been taken to get through the winter well, for example by enabling a higher utilization of existing power lines. This gained around five terawatt hours of additional capacity. “That is the same order of magnitude that the extended operation of the nuclear power plants has brought about. We see the same potential again for the coming winter,” said Meyerjürgens.
The nuclear phase-out in Germany is “a purely political decision”. “We have known for years that he is coming and have prepared accordingly. Accordingly, we are now in a position to deal with it,” he said. The contribution of the last three nuclear power plants is no longer large. “In this respect, we will manage without them. Nevertheless, of course we still need reliable performance in the future.”
More: Up to 600 billion euros: The energy transition requires enormous investments