Blog

Lack of long-term decision-making puts the Netherlands under high voltage

The Dutch power grid is unable to keep up and the main cause is known. Nieuwsuur recently discovered that the Netherlands Authority for Consumers and Markets (ACM) has formed a ‘fundamental emergency brake’ in recent decades. As a result, network operators were unable to obtain financing for the improvement of our power infrastructure. As the ultimate symptom-fighting solution, it was recently announced that companies in the affected areas are now being asked if they can shift their energy consumption to other moments.

For example by operating on the weekend or at night, when general demand is lower. This energy crisis is yet another piteous example of the institutional inability to integrate long-term vision into policy making. With in this case the energy transition, the housing shortage, and sustainability ambitions as prime victims. It is about time that we find ways to make short-term efficiency less leading in our decision making processes, and try to institutionalize more long-term thinking. Let’s create a Third Chamber, that, as a visionary power, will be responsible for the structural well-being of collective sectors.

Duurzaam Beleid

It is a case that has puzzled me for several years. The Netherlands are facing an acute shortage of electricity. Recently, high-voltage network operator TenneT announced that even more areas have been added to the list where the power grid is full. With more than 6,700 companies and social institutions already on the waiting list, the demand for connections is many times greater than the supply. Housing projects are at a standstill, sustainable projects and sustainability ambitions of cities and industries can be discarded, and corporate interest groups are sounding the alarm because the power grid is significantly slowing down economic growth.

At the same time, problems arise on the supply side of the energy grid, since sustainably generated electricity can’t be added either. The grid operators, who are responsible for the power grid in the Netherlands, desperately called on the government to stop subsidizing solar panels last January. And the door is also locked for sustainable energy projects on an industrial scale: new windmill and solar parks can’t be connected to the grid.

How can there be both a supply and demand surplus in a sector that should be regulated by the laws of market forces? Did the network operators fail to see that the energy grid was going to play a crucial role in the energy transition? Did they think electric cars and heat pumps were just a fleeting trend? Have the European guidelines for the use of renewable energy of the Member States perhaps ended up in the network operators spam boxes since 2009?

Efficient

Recently there was a partial explanation. A reconstruction by Nieuwsuur showed that the Netherlands Authority for Consumers and Markets (ACM), which acts as a regulatory body for network operators, is forcing network operators to create an infrastructure that aligns with demand as closely as possible. Policy is and was aimed at “preventing investments that later could turn out not to be necessary”, as ACM chairman Martijn Snoep defends it in the publication. It appears that ACM determines how much grid managers can invest in expanding the electricity grid. And those investments can only be approved once established that new connections will actually be used. ACM continued to do this, despite early warnings from external, independent advisory bodies (the WRR in 2008, PWC in 2012) and despite legislative changes.

Reached the limit

Nothing against the ambition to invest as efficiently as possible, of course. But the fact that an institution with a worldview that only consists of short-term efficiency has so much say over a collective sector is absurd. Especially when that sector is so instrumental in the transition to a sustainable, durable future as our most important energy infrastructure. But it’s no exception. Almost all recent crises in this country have the same root cause: the inability to integrate long-term vision into decision-making. Take the late shortage of Intensive Care beds for example. Or look at the current struggle to intervene in nitrogen emissions. And see the impending challenges in our water management.

Time for a Third Chamber

It is about time that a new balance of power is created, able to counterbalance the institutional inability to reason and act with the long term in mind. If collective sectors and bodies are only managed from a perspective of market forces and efficiency, without room to include the effects of major trends and unexpected external factors in decision-making, then the question is not if, but when the disaster will break out.
But how can one institutionalize more long-term vision? Let’s add a fourth dimension to the legislative, executive and controlling powers. The Visionary Power, responsible for the long-term policy and well-being of collective sectors. A body for which we vote every 10 years. A body that is separate from party politics and has an initiative and leading role in the policies that are pursued in collective sectors. A body that also has space to look at out-of-the-box optimization solutions. Such as Smart Energy Hubs – in the case of the energy crisis – where the surplus of generated energy is converted at a local level into directly usable buffers, such as hydrogen and oxygen.

Great willingness and ability

The decisiveness and innovative capacity in the Netherlands are enormous. You saw that in the healthcare sector during the corona crisis, and this is also clearly shown by the reconstruction of Nieuwsuur. Where in 2014 there was an equivalent of about 1 Gigawatt (GW) of solar panels on Dutch roofs, this was already more than 14.4 GW in 2021, according to PwC figures. The Netherlands are now number 2 in the world in terms of amount of solar power generated per capita, after Australia. This shows we have the power to collectively simulate and implement in the short term. Now all that’s left is a system that allows us to reap the benefits of this power in the long run.