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Climate change and environmental degradation present a threat to Europe, as to the world. To overcome these challenges, the EU has put in place the Green Deal: an ambitious package of initiatives to achieve one ultimate goal; reaching climate neutrality by 2050. Achieving such a transition will be no small feat: the fossil generated energy foundation needs to be phased out entirely. And, while 2050 might seem far away, action is required now, with the EU for example aiming to cut emissions by at least 55% by 2030. In line with these goals, the production of electricity by renewable energy sources has been incentivized by means of EU initiatives, such as the Net Zero Industry Act. This growth in renewable energy usage has a large impact for a variety of different stakeholders. In this article, we will explore this issue and what it means for businesses.
This article is written by Mourad Seghir ([email protected]) and Bart Ladru ([email protected]). Mourad and Bart are both part of RSM Netherlands Business Consulting Services with a specific focus on sustainability.
This article will explore the energy transition for businesses in a wider sense. The energy transition refers to the transition from the energy dependency from fossil fuels to renewable sources. It is important to be aware that the impact of the energy transition and its opportunities are different for each industry. The energy transition is critical for various industries because it is forcing them to rethink their energy consumption, switch to more sustainable sources and what is needed to do so. For manufacturing companies, it can mean switching to renewable energy to reduce their carbon footprint, while service-oriented companies can seize new market opportunities by offering energy-efficient solutions. In addition, the energy transition encourages innovation and collaboration across sectors, creating a more resilient and sustainable economy that benefits.
In a growing number of countries, the fast development and growth in renewable energy sources is causing problems on the energy grid. Renewable energy sources are poorly predictable and variable, which leads to unpredictable fluctuations in the energy supply, which results in grid congestion. Grid congestion occurs when more electricity needs to be transported than the grid can handle at that moment. Hereby, the grid can be full. Other causes are that the current energy grid is designed for big plants to produce electricity at a central point, where the electricity cables are thicker. Contrasting with the thinner cables in areas with wind and solar parks. Thinner cables have limited capacity for transporting energy at once, which is challenging as more households and companies generate their own electricity, such as through solar panels. At these places the cables are also thinner, and the current energy grid is not built for this ‘two-way traffic'.
Pressing needs
The main problem of grid congestion is that not all households, energy projects and businesses can be connected due to grid capacity limitations. To achieve the European Green Deal, rules have been made to increase the use of electricity and reduce other resources, such as gas or coal. Grids are essential to decarbonise electricity supply and effectively integrate renewables. Therefore, households and businesses need to electrify, leading to a growing electricity demand in the upcoming years. In the future, businesses must achieve net zero emissions as well by renewably produced energy, or by producing their own electricity, for instance with solar panels. During grid congestion, solar panels will automatically stop with delivering energy to the grid, which causes energy loss.
Why does this matter for businesses?
When the grid is full, not everyone can get a grid connection. A lot of companies want to switch from fossil fuels to electricity, or even renewable energy. For this purpose, companies need a new or bigger electrical connection. Because of the full grid, companies are placed on a long waiting list. In the Netherlands about 9400 companies are already on this list with a waiting time of 10 years. The Netherlands has been grappling with these challenges for a longer period than its European counterparts. This problem is manifesting itself in the Netherlands right now largely because of the significant strides the country has made in its energy transition in recent years. But it will only be a matter of time until more countries are dealing with these types of issues. For instance, Germany and France are currently also starting to experience similar problems with their grid . Because companies need to wait for a new connection, they cannot electrify or grow, and it even can create problems with achieving mandatory sustainability measures.
With a letter to The Dutch House of Representatives, Minister Rob Jetten makes it clear that if no further action is taken, the congestion of the energy grid presents large risks for companies . For instance, from 2026 till 2029, there may be more blackout risks at peak times. Power cuts can cause enormous problems for companies.
How is the government responding to this?
The long-term solution for grid congestion is to expand the grid, by adding a lot of new energy cables. According to the International Energy Agency (IEA), the world annual investment costs for grid expansion will need to double by 2030 to over 600 billion dollars around 2030 to solve the problems of the energy grid and meet climate targets . The Netherlands has set a good example by increasing their investment for the next ten years to in total 160 billion euros . But different countries in Europe, such as France and Spain, invest too little to realize the required expansion.
Grid expansion is a time-consuming process. As Jetten also emphasizes, it will take several years to solve the energy congestion and the situation is projected to worsen in the coming years because of the increasing energy demand. Therefore, it is important for your company to take proactive measures within the near future.
Forward thinking
If you intend to grow your company in the next few years or would like to play a role in the green transition, it is inevitable that you will need more electricity in the next few years. To avoid the long waiting list for a new or bigger grid connection, it is crucial to consider other options. One such an option is Battery Energy Storage Systems, BESS.
BESS can help stabilize the grid, by using excess energy to charge a battery in periods of excess supply and discharging it in cases of energy shortage. This removes the necessity of using fossil fuels to fill in the gaps when the sun does not shine or when there is no wind.
Aside from improving the congestion on the grid, BESS can also be utilized to solve energy needs on an organizational level. For one, it will enable companies to store energy that would otherwise go to waste because of the grid congestion. Moreover, it will allow companies to keep their energy footprint completely green by utilizing previously generated energy. Moreover, it also enables organizations to purchase more energy than their energy connection allows. Another advantage of energy storage is that you become less dependent on the energy grid. With a higher risk of blackouts in the coming years, energy storage makes sure that you always have access to energy.
BESS is an emerging technology, which is expected to grow alongside the further electrification of our energy needs. There already are companies providing energy storage solutions. They enable other companies to fuel their operations with extra capacity alongside their own grid connection. Moreover, BESS can offer high output required for example EV fast charging, which the existing grid infrastructure cannot provide in some instances. At the same time, it also helps buffer power from the grid when it would exceed capacity, mitigating costs.
This could for instance be interesting for industries that utilize EV charging systems such as hotels, supermarkets, or public transport operators. Warehouse operators could make use of it too, using it to for example charge their electric forklift trucks .
To learn more about energy storage, you can read our report ‘BESS Market Perspective Report'. In the report, we explore the market and future considerations about BESS. BESS means something different for each industry, therefore we will specify the different opportunities and considerations for each industry in the report.
| Businesses in 2030 without BESS | Businesses in 2030 with BESS |
| Blackout risks | Independent from the grid |
| Chance of energy loss during grid congestion when producing your own energy. | Optimal use of your own energy production |
| Smaller energy capacity | Meeting sustainability goals |
In order for your company to actively contribute to a successful energy transition as laid out in the Green Deal, it is critical to proactively prepare for the future. Further electrification will be essential to both enable business growth, as to become a climate neutral organization. Embracing Battery Energy Storage Systems (BESS) will be vital to circumvent lengthy waiting lists, minimize energy loss, and attain autonomy from the traditional energy grid. By embracing these measures, your company can position itself at the forefront of the evolving energy landscape, ensuring resilience and sustainability for years to come.
RSM is Thought Leader in the field of Technology and Sustainability consulting. We offer frequent insights through training and sharing of thought leadership that is based on a detailed knowledge of regulatory obligations and practical applications in working with our customers. If you want to know more, please reach out to one of our consultants.