Hundreds of thousands of households and companies with greening plans in almost all provinces in the Netherlands can breathe (a bit) of relief again. Tennet, the state-owned company that manages the national power grid, will receive an emergency loan from the cabinet in the short term that could amount to 25 billion euros to help solve the blockage of that grid – an amount equal to the defense or justice budget.
This blockage – last year more and more parts of the Netherlands turned red on Tennet’s ‘alert map’ – is currently one of the biggest obstacles to the energy transition. This makes it increasingly difficult to connect new solar panels and wind farms at sea. And for companies that want to ‘electrify’ their production process, there is often no room or there are long waiting lists. At the end of last year, there were 124 brand new heat pumps in a residential area in Apeldoorn nothing to do in houses because there was no space on the net.
With the fresh financing, Tennet can continue to tackle this growing problem. Investments had already been significantly increased in recent years, but no money was yet available for the coming phase. The government had actually wanted to raise the money for this ‘reinforcement’ through the sale of the German arm of Tennet. Negotiations about this started last year – initially much against the wishes of Tennet itself, which preferred to remain one large company.
But those negotiations have recently stalled due to a political impasse in Germany following the budget crisis there late last year. No one knows what will happen next and the clock continues to tick undisturbed. And so unorthodox steps are necessary, according to the new Minister of Finance, Steven van Weyenberg (D66) in a statement. letter to the Senate and House of Representatives on Friday evening.
“This is essential for the energy transition and the business climate.” During a press conference when the helpline was announced, he said: “This really couldn’t wait any longer.”
Better avoided
The measure was announced after trading hours on Friday evening by Van Weyenberg at the Ministry of Finance NRC already reported on Thursday that it was coming. Its importance was emphasized in several places, including by the grid operator itself. A spokesperson for Tennet said in a response: “It is extremely important for us that we can continue. We have to build, build, build. So it’s good that this is there.”
But it was also a measure that the outgoing cabinet would have preferred to avoid. Tennet is not only active in the Netherlands, but also in Germany, and the money that is now made available by the government largely flows there. Van Weyenberg, who had just been installed in his new position on Friday afternoon, did not give a precise figure. But he did say that it is a “very significant part”, “more than half” of the total.
That is something that the cabinet previously did not want at all costs, entirely in line with the ‘own power grid first’ line that is popular with a number of political parties. The House of Representatives also previously expressed discomfort about such a construction. The VVD and the PVV, which are now trying to form a new cabinet together with NSC and BBB, were very critical in debates about Tennet.
The entire loan amount does not necessarily have to be spent. If the deal closes quickly enough, there will be other money.
Not enough yet
Van Weyenberg himself emphasizes that this is a loan that must be repaid in full by 2040 at the latest. Tennet pays roughly the same interest that it would otherwise pay on the market. However, due to the size of the amount required (and the capital requirements that lenders also impose), Tennet would not be able to arrange a loan on the market on its own, according to the minister.
The House of Representatives and Senate still have to agree to the plan before the money can be provided. Van Weyenberg, who had already informed the House in confidence before going public, expects to have that permission before March 1.
Tennet is still not there with the injection. A total of 110 billion euros will be needed over the next ten years, according to the latest calculations by Tennet, for both the networks in Germany and the Netherlands. Although this could easily increase in the coming years, as a result of price increases for materials (cables and plugs) and even higher greening ambitions that require even more power infrastructure.
And of course the question remains whether and when the deal with Germany will still be completed. At Finance and Economic Affairs they have high hopes for this, it sounds, but Van Weyenberg also says in his letter to Parliament that it “cannot be said with certainty” that it will actually come to a successful conclusion. The amount made available must also provide Tennet with sufficient capital not only in 2024, but also in 2025.
However, Van Weyenberg dismisses the suggestion that the government is therefore taking into account that it may take until next year before a German deal is completed. “The talks are ongoing, the parties are approaching each other.” According to him, the choice to make sufficient money available for two years simply provides more security.
GroenLinks-PvdA-MP Tom van der Lee nevertheless expresses some doubts that they will reach an agreement quickly. “You can implicitly deduce from this that they have not yet reached an agreement. I am curious about what obstacles there are along the way.”
In his view, the measure is also part of the negotiation game. Germany knows that Tennet needs money quickly, and as it delays, the pressure on the Dutch government to sell grows, on possibly less good terms. “Time pressure is of course not pleasant for your negotiating position. Then I understand that you are now thinking of something to get out of that German pressure.”
Also read
‘Away from the Champions League’: Tennet must regroup after the sale of the German branch