Time for an Electrification Revolution
There are many reasons - such as climate, geopolitics, availability and cost - why the future lies in fossil-free energy. Electrification, where sustainably generated electricity replaces the use of fossil fuels, is therefore an essential building block for the Netherlands of tomorrow and beyond. In order to break away from 'fossil', companies are already doing a lot in terms of electrification. If this trend continues, it could lead to an increased demand for electricity of up to 80% by 2030 and up to 300% by 2050 (compared with 2020). To meet the increasing demand for electricity, the Netherlands will need to make significant investments in sustainable electricity production. It is predicted that a fourfold increase in that production will be required by 2030 and a tenfold increase by 2050 (also compared with 2020).
So far, all parties involved have taken quite a few steps in the right direction. In itself, that is good news, but we are not going to achieve the stricter climate goals by taking a gradual approach. Far more radical action is required. An accelerator will have to be deployed with the necessary urgency – it is time for an electrification revolution. Only a radical action plan will be able to turn the climate tide and help us achieve a fossil-free energy supply. There are ten areas that require urgent government action (see box). These action points affect the whole of society: The industry, the built environment, transport, the energy sector, grid operators and the government.
Clarity and determination
The government, as a point of departure, will have to put forward a clear campaign plan in the very near future. Companies want clarity – they want to know what they will and will not be allowed to do. As long as decisions are clearly substantiated with facts, a clear ‘no, from tomorrow onwards that will no longer be permitted’ is definitely preferable to the ‘wait and see’ approach. Once the business community has clarity, it knows what it can and cannot invest in. That requires a government with a vision and a plan, which takes charge, sets clear milestones, sets a clear end goal and identifies a clear route to achieving it. It also requires a transparent government that explains decisions clearly and firmly keep to such decisions. To achieve a level playing field, it is important to follow the plans of the European Commission.
It also requires a government that does everything in its power to accelerate processes. The actual construction of a large wind farm happens faster than the decision-making and permit process that precedes it. When in a (climate) crisis, we should expect that emergency measures be taken. The government needs to do everything in its power to significantly reduce processing times, public comment procedures, permit processes and appeal proceedings. Of course, this is not a plea to exclude stakeholders – it is a plea for more speed and determination. We simply cannot afford to wait years for the construction of new wind farms when we actually need the energy generated by those farms tomorrow.
Close collaboration between the industry and the energy sector
By extension, government and grid operators in particular will have to produce a plan for future-proof energy infrastructure. This may initially involve more efficient use of existing infrastructure, but investments in large-scale infrastructure expansion are inevitable. It is important to make clear agreements about the speed and areas of expansions so that all stakeholders know where they stand. Again, it is very important to remove administrative obstacles such as lengthy permit processes.
However, it is not only government and grid operators that need to get started. The industry and the energy sector will also need to make a proactive contribution to a fossil-free future. The two sectors are going to need each other more than ever. Major investments in electrification and renewable generation are required, and those investments in the energy transition will be so high that virtually no party will be able to bear the costs alone. Close collaboration between industry and the energy sector will be vital to the success of the electrification revolution.
Fortunately, there are some excellent examples of successful collaboration between energy companies and the industry. BASF and Allianz co-invested in Vattenfall's Hollandse Kust Zuid offshore wind farm. This partnership increases the security for the wind farm developer that the electricity generated will actually be purchased. In turn, the partners now have access to sustainable energy for an extended period of time.
The advantage of a partnership is that you invest together, spread the risks and share knowledge. In Sweden, Vattenfall is working as a joint venture with mining company LKAB and steel company SSAB on the HYBRIT project to produce fossil-free steel, which neither party would have been able to do on its own. By joining forces, industry and the energy sector can make considerable progress in the joint energy transition.
Energy companies and industry will also have to collaborate to coordinate the supply and demand of electricity. More wind and solar energy means more fluctuations in the electricity grid. You can increase and reduce energy generation at gas-fired power plants in line with demand, but wind and solar power cannot be regulated. Naturally, the energy sector focuses on technologies where fine-tuning is possible. They are, for example, working on converting gas-fired power plants from natural gas to hydrogen and on storage capacity in batteries. However, industry will be urged to align energy use more with energy supply. As consumers will be asked to use their washing machines at favorable (and cheap) time slots, the same will be asked of industry. In this respect much can be gained from collaboration between industry and energy companies. Vattenfall already has a similar partnership with Nobian's chlorine plant in Rotterdam. They coordinate part of their industrial process with the electricity supply.
Training and retraining
I want to raise a final issue: All parties involved in the energy transition will need to join forces when it comes to HR policy. Over the coming decades the energy sector will be the place to be for young talent. This is where they can truly make a difference. A lot of specialized work needs to be done over the next few years and decades, and this will require large numbers of qualified employees. We will therefore need to encourage more people to consider technical jobs and – training by investing in retraining programs and offering extra incentives for technical jobs related to the energy transition. This is a challenge for all parties involved in the electrification revolution.
Ten action points for the electrification revolution
- Introduce to the National Energy System Plan a concrete action plan aimed at CO2-free electricity production by 2040 at the latest and a CO2-neutral energy system by 2050
- Invest in social acceptance and support
- Encourage energy conservation and improve energy efficiency
- Encourage and facilitate the rapid expansion of renewable electricity generation
- Encourage direct electrification in the industry and transportation where possible
- Accelerate the phase-out of natural gas in the built environment
- Provide sufficient (CO2-free) flexibility for a reliable energy system
- Set up appropriate investment and regulatory frameworks for expanding and optimizing energy infrastructure
- Create an appropriate investment and regulatory framework for the production, distribution, use and storage of fossil-free hydrogen
- Secure sufficient supply of (technical) labor, skills and materials
This essay was written by Marnix van Alphen, Energy Transition Manager at Vattenfall. Published in Management Scope 10 2022.