The energy transition: “We could never do it alone. No one can.”

As Stedin’s Chief Transition Officer, David Peters works on three core themes: digitalization, the company’s investment portfolio and its interactions with society. Digitalization at Stedin is about infrastructure, work processes, data science cases and data quality, among other things. “As for the investment portfolio," Peters continues, "it has become increasingly difficult to estimate what the energy landscape will look like thirty, forty years from now, which is our depreciation period. And we need to find a new way of engaging with society. A few years ago, Stedin was not much more than the energy system’s back office: people only contacted us if there was an outage, or they were building a new home. The energy transition has turned this on its head, and energy infrastructure has come to play a decisive role."

Smarter grids

The infrastructure will have to be modified in order to facilitate the energy transition, which is no mean feat if one considers that many of the parts involved have 40-year lifespans. Peters: “The lead times in the physical infrastructure transition tend to be several years, but it takes less than a year to build a solar park. The Netherlands has made rapid strides in solar energy, significantly outperforming other countries, and we have been able to utilize much of this growth in our grid. We have our new data capabilities to thank for this development, and we have held very fruitful talks with municipalities and developers. The asset side may be long-cycle, but smaller, more rapid transformations are occurring all the time. We are learning new skills at an incredible rate. Over the past few years, we have set up a data office, so even if the climate agreement were to go in a radically different direction, it would only take us 24 hours to calculate how it would impact our grids and our long-term investment plan. We are also hard at work installing sensors in our grids that will enable us to combine data with models to get a better handle on energy flows by means of more accurate estimates and calculations. We are also working on our IT backbone – the data engineering side of things. Collecting data is one piece of the puzzle, but you also need to harness that data for models and make it accessible for engineers, which requires a joint effort. At the same time, we are preparing the IT landscape for the digital acceleration."

“Over the past few years, we have set up a data office, so even if the climate agreement were to go in a radically different direction, it would only take us 24 hours to calculate how it would impact our grids and our long-term investment plan.”

Investments doubled

Financing is also a challenge for Stedin: it may take decades to recoup investments, while the payments are due today. In Peters’s opinion, partnering with the government would be a realistic option, but for now, they will mainly have to “get as much bang for their buck” as they can, without losing sight of the future. “In the bulk of the investments we make, our main goal is to end up with no regrets. If part of the network needs to be replaced, or a road is rerouted, we strive to find the most future-proof solution. If we know that another party is digging up a road, we can capitalize on the work that’s already being done, as digging down is usually the biggest cost item. Generally speaking, we adopt a regional approach and identify potential developments in each region up to 2050, before exploring the best way to flesh out these developments given constraints such as uncertainty and space. We’re now spending EUR 700 million a year, which is a lot of money. But what’s wrong with spending EUR 800 or 900 million if it means we’re more prepared for transitions in the future? Surely we don’t expect to get something for nothing?”

ORTEC: What are the KPIs that define an investment decision?

There are several criteria we look at when deciding on an investment, says Peters. “Most of these criteria come down to what we expect we will need in the future. Customer demand is one important criterion and when demand increases, we generally have to make more capacity available, which means we have to go looking for the cheapest way to make as much power available as possible. Until a few years ago, our depreciations matched our investments, but in the few years that I have been working at Stedin, I have seen the investments double in size. Before 2030, we will have to invest several billions of euros in our grids. We are facing ever-increasing uncertainty and have taken to coordinating with our surroundings more and looking much further into the future. Our core business is being a knowledge owner in energy. We share our knowledge wherever we can.”

Changing the rules

The grid is currently undergoing masses of different transformations all at once, which are all connected and integrated in some way, Peters adds, such as the move to electric transport and the heat transition. "We try to integrate that fact into our models. In the past, our people focused their attention on electricity, before evolving to electricity and gas. Now, we work on the entire energy system, including hydrogen and heat. This is entirely unique: everyone else has their own perspective, and yet we have to take all these different perspectives into account in order to get a fully integrated picture of the energy system.”

ORTEC: Your organization has mastered the art of looking ahead. Wouldn’t you like to have a greater influence on the energy transition?

"Some choices require democratic legitimacy," Peters explains. “We are not part of the Spatial Planning department, but we have to keep talking to each other to make sure we’re charting the right course. It’s easy to say that a smart grid and Big Data enable pretty much everything, but putting it into practice is something altogether different.” That is why Peters spends a large chunk of his time talking to local and national politicians. “Our models show that facilitating storage will prove to be incredibly important, but today’s laws, regulations and rates complicate matters. By changing the rules of the game, you can make better use of existing and new infrastructure. The current Energy Act was written in a world that was very different from the one we live in today. You have to keep changing the rules together to facilitate and accelerate the developments that will benefit all of the Netherlands.”

“In the past, our people focused their attention on electricity, before evolving to electricity and gas. Now, we work on the entire energy system, including hydrogen and heat.”

External world as a flywheel

The energy transition has put Stedin firmly in the spotlight, but Peters stresses that the process involves a multitude of parties. “Everyone will experience the added value we can contribute to the energy transition. As a company, you need a higher purpose so that employees feel they have an important role to play, but we are keenly aware that, as a grid operator, we could never do it alone.” No one can, but having that awareness is particularly important for us. We have scaled up our collaboration with municipalities and we make sure to coordinate our plans with industry partners, which is another competency you have to develop. You have to know exactly when, where and how any new housing projects will be built, and because the infrastructure in Utrecht, say, is different from the infrastructure in Rotterdam, you need specific details. It may sound obvious, but we had to learn that lesson the hard way. Demand forecasting is crucial in this ever-changing environment.”

ORTEC: How do you keep the conversation going with stakeholders?

“We have regional directors and account managers who foster dialogue at the strategic level, serving as the liaison officers between the outside world and the technical people who design the grids. We try to generate as much data as possible to facilitate this dialogue. To create such a Regional Energy Strategy, we simply bring our maps and tell stakeholders what is the smartest possible way to go about the energy transition. To succeed, you need a good understanding of the needs and wishes of the authorities and the technical side of things. Ultimately, this level of coordination works as a flywheel: by actively engaging with external parties, we get access to more input that enables us to make better plans, which in turn helps us provide more input to the rest.”

There are currently three types of scarcity in the Netherlands, says Peters: financing, feasibility and space. “Feasibility concerns the technical side of things, while space is about creating support: we don’t have a lot of space available, and we have to make everything fit. Whenever I cycle through Utrecht, I see lots of banners: No windmills here." Peters is not in favor of a hard-handed approach: “Polarization hampers mobilization, and a country like the Netherlands owes it to its standing to get the energy transition right. The longer you wait to follow through, the tougher the measures you will have to take and the more resistance they will spark. Ultimately, it will only become more and more difficult to get things moving in the right direction. I like the Fit for 55 approach taken by the European Commission: rather than approaching emission reduction from an entirely technical point of view, they came up with a balanced plan that addresses social issues too. In the Netherlands, we tend to try and find a balance between the ‘merchant’ and the ‘preacher’. If we had tackled this problem as a typical ‘preacher’ for the past 15 years, the bill would have been cheaper. Now, we have ended up in a world with tremendous feasibility issues, and the problem has only become more urgent.”

About the interviewee

David Peters has a degree in Applied Physics from Eindhoven University of Technology and a degree in applied ethics from the University of Leuven. He was a member of the National Think Tank and worked for Boston Consulting Group until 2015, where he spent his time on international strategy and organizational issues, focusing particularly on the energy sector. In the same year, Peters joined Stedin, where he became the Director of Strategy, responsible for strategy and innovation. Since 2018, Peters has held the position of Chief Transition Officer in Stedin's board of directors.

This interview is held by Frans van Helden, Managing Director ORTEC Data Science & Consulting, and Arjan Gras, interviewer.