Expert blog – March 19, 2024
Grid congestion is a hot topic, especially in the world of impact investing. On the one hand, we would like to accelerate the energy transition, on the other hand, we are limited in this by the infrastructure of our electricity grid. Joost Vlot, Investment Manager at Energiefonds Overijssel, one of the funds that StartGreen manages, explains how grid congestion could arise and how StartGreen helps to solve the traffic jam on the electricity highway.
Mismatch of supply and demand
'Grid congestion is mainly caused by a mismatch between supply and demand of electricity. In recent decades, the focus has been on reducing fossil fuel generation. We have therefore started producing more and more green energy and are increasingly switching to electric cooking, heating, driving and production. This has caused the demand for electricity to increase enormously.
Too much and too erratic supply
On the supply side, we are generating more and more sustainable electricity with sun and wind. The disadvantage is that solar and wind energy are not generated at set times and therefore enter the grid at irregular times. In addition, the supply of electricity to the grid has reached its limits in several places and the grid operator has in some cases banned feed-in.
More demand due to electrification
On the demand side, both private individuals and companies are electrifying. Both groups contribute to grid congestion. Private individuals who purchase a heat pump and an electric car consume a little extra power. But if millions of households electrify, their collective impact will be significant. Currently, these numbers are still not too bad (or 'against', if you look at it from a sustainability perspective).
When a large, industrial company switches from fossil fuels to green energy, the impact is much greater. The electrification of industry and the large-scale generation of wind and sun pose relatively more challenges for the infrastructure than the switch by private individuals to (green) electricity. To put it into perspective: a wind turbine may produce as much electricity in one hour as one household uses in an entire year.
Highway too narrow and too full
The electricity network is often compared to a highway network. We are now at a point where the lanes have become too narrow and too full. I personally think the comparison with a water network is clearer: you cannot supply sixteen sprinklers with water with one garden hose. And you can't solve that by connecting that one garden hose to ten taps. Upgrading the entire infrastructure is very complicated and costs a lot of money. You then have to open up the entire country and it also requires a lot of raw materials.
Waiting list for connections
The result is that the grid operator can no longer always allocate the requested power for a new connection or even not provide a connection at all. It has now even reached the point where more than 9,400 companies are waiting for a connection. Last summer there were 6,000, so that number is increasing alarmingly quickly. At StartGreen we are now looking at what is possible. How can we improve the imbalance between supply and demand with our financing?
What does StartGreen do?
At StartGreen we not only see the problems arising from grid congestion, but also opportunities. We are involved in business development and translate that into financing what is needed to realize solutions.
For example, the Overijssel Energy Fund, which we manage, recently became a hydrogen producer H2-GO financed. The Sustainable Economy North Holland Participation Fund (PDENH), which we manage together with KplusV, invested in Dexter Energy (balances supply and demand with smart software) and – together with Energiefonds Overijssel – in S4 Energy (balances supply and demand with a flywheel). And crowd financing platform Invesdor is also raising money for a number of innovations that solve the imbalance, such as Suwotec and HelloStroom (both drivers of home battery use).
You might want to read: StartGreen helps hydrogen projects become more 'bankable'
Everyone can help
I believe that everyone who uses electricity can contribute to solving grid congestion by using as much energy as possible when it is generated. The sun shines? Turn on the washing machine. Is it windy? A good time to charge the car. This applies to both private individuals and companies. Everyone can help by balancing supply and demand as much as possible. In addition, maintaining the netting arrangement for private individuals at a micro level is economically beneficial, but it partly removes the incentive to match supply and demand.
Peak shaving
In addition to balancing supply and demand, it is important to minimize peak usage; peak shaving that's called. This also applies to both private individuals and large industrial users. Don't charge your car in one hour, but in six hours. You use the same amount, but you spread the use better, which puts less strain on the electrical network. On a large scale, the same applies to a large online retail chain that needs to load its vans. Bidirectional charging, or using your car battery as a buffer, can help to require less power from the grid during peak hours. Instead, you use up what's left in your car battery and can easily recharge it after the peak.
Grid congestion is law congestion
It is also good to know that grid congestion partly exists on paper, hence the term 'legal congestion'. Many parties do not use the full potential of their connection. If you add up all those 'leftovers', there is still a lot of unused capacity. However, you cannot simply take them away from existing connections; collective connections can be a solution. Companies use each other's allocated assets virtually, i.e. only on paper. This 'virtual collection' is now being tested at several locations in the Netherlands. One of these is the 'smart energy hub' Hessenpoort, an industrial area in Zwolle where generators and users of green energy work together to balance supply and demand.
Usage patterns and profiles
If it turns out that you as a collective use more during peak consumption than you are allowed to consume together, you can look at usage patterns together. One party can charge its electric vans in the evening and the other after midnight. Or you look at user profiles: you match a party that uses a lot of electricity at night with a party that does so during the day. You don't need a shovel in the ground, but this way you can optimize its use. This often happens with the use of smart software.
Use of residual flows
Then there are physical ways to make a smart energy hub even smarter, such as the use of residual flows. There is a high demand for electricity at the aforementioned Hessenpoort industrial estate. H2-GO produces hydrogen with an electrolyser. The oxygen released during the production of hydrogen is used for water purification by the water board. This saves energy and less gas is released during the purification process.
Remove financial obstacles
Some innovations are so risky that the bank does not provide a loan. It is our job to help further development with the capital we manage. We cannot invent a new electrolyser or battery, the Willie roots in Delft have to do that. We can remove the financial hurdles to get from idea, to plan, to project, to realization.'
English (UK) 
Nederlands 
