Don't rock boat over grid expansion, top TenneT exec warns new German government

The incoming German government should stick to the current pace of onshore electricity grid expansion, which accelerated under the outgoing administration, but also put the necessary regulations in place for further projects to be ready in the late 2030s, a high-ranking executive of Dutch-German transmission system operator TenneT said.

TenneT now expects the first 2GW of the SuedOstLink (SouthEastLink) line to be ready in 2027, and the 4GW SuedLink a year later. The next 2GW of SuedOstLink then are planned to be delivered by 2030, while NordOstLink is also “currently on track”, Dietz said.

“We should not look back 10 years. Let’s look at what is really influenceable. I’m extremely positive that we will deliver these AC and DC onshore projects as promised. Also, because in the past two, three years, we had extreme help from the government by easing a lot of routines.”

'Overriding public interest'

“This temporary measure has been helping extremely,” Dietz said, adding that the synchronisation between onshore and offshore grid expansion is going quite well.

As the EU emergency regulation is only valid until the summer, Dietz pointed out that the incoming government needs to put the Renewable Energy Directive III (RED III) regulation passed by the EU into national legislation. The directive establishes targets for increased renewable energy use and is part of the EU’s Fit for 55 package. It also includes the possibility of granting infrastructure and renewable projects the status of being in the ‘overriding public interest’ in a more permanent way.

The regulation also sets sector-specific targets for renewables in heating and cooling, transport, industry and buildings, and foresees shorter approval periods for renewable projects and the set-up of renewable acceleration areas.

Public perception in society about the necessity of grid links also “has changed dramatically,” Dietz said, adding that at SuedLink, for example, there were some single objections recently, but not thousands like some years ago.

'Don't change too much'

“The outgoing government really helped us with speeding up a lot of things, for example in the authorisation procedures, and what we need now is stability on that. Because large infrastructure projects of grid expansion are not short-term projects that are done after half a year,” he said

“Changing the framework in between is not helpful. So really, I would like to ask [the next government] to stick to what we have, don't change too much.”

A “bit slippery” is, however, the outlook for projects to be delivered in the 2037 to 2040 period, Dietz said, adding that for the longer-term expansion, the government still needs to provide a clear political and legal framework.

One thing TSOs need is an update of the Federal Requirements Plan Act (Bundesbedarfsplangesetz), legislation for the accelerated grid expansion that contains a list of specific future projects which need to be built.

Massive costs

Tackling the challenges of Germany’s grid expansion can only be done in synch with other TSOs (Germany has four of them), Dietz added, “not only money-wise, but also project-wise”. To save costs, the company doesn’t carry out procurement project-by-project but buys some components such as transformers in bulk once a half year. In offshore wind, TenneT has procured 14, 2GW platforms at once.

TenneT last year has invested “somewhere close to €10bn” in grid expansion projects, with about two-thirds of that going to German projects, the executive said.

Huge investments are also planned for the next couple of years, particularly after Germany had boosted its offshore wind target to 70GW by 2045 — a volume requiring massive financial resources for grid links.

In consequence, the Dutch state, which owns TenneT, said the required financing would be too large for it to bank, and it would try to sell the German unit.

The investor search and now publicly stated consideration for an IPO came after Germany’s government had abandoned efforts to take over TenneT Germany through its development bank KfW.

The search for a structural solution for TenneT Germany – be it in the form of a participation of private investors or the form of an IPO – “is not blocking us at all” Dietz assured, and the company is continuing to invest “a huge and concurrent necessary amount of money” in the grid expansion projects.

Other TSOs are also facing the challenge to stem this “huge amount of money which is needed”, he said, pointing to a requirement of €320bn for the grid expansion in the next 10 years deriving from the latest grid development plan (Netzentwicklungsplan) in Germany.

Supply chain bottlenecks

Another challenge is bottlenecks in cables and other components.

“It is true that with all these supplier markets, we are really on edge currently, not only in cables … It's starting with companies which are helping us with line routing. It's ending with suppliers of all equipment,” Dietz said, adding that suppliers can’t ramp up production as quickly as needed for the massive grid expansion. “More or less everywhere, there is some kind of shortage.”

Framework agreements have already started to ease the situation somewhat, the executive added.

“We see some of the cable manufacturers now building new plants for cables, for example. We see them building new vessels to lay the offshore cables. That’s really helping.”

“All the equipment, which is now being produced in Europe … will also be helpful at the end for us in Europe … in this specific case, Trump is involuntarily helping us a bit.”

“We can profit from the production ramp-up at suppliers and left-over capacity from components no longer required in the US”, Dietz said.

Asked whether TenneT needs to also source equipment from Chinese companies to deal with possible supply chain bottlenecks, Dietz pointed to the “sensitive” nature of transmission grids.

“We deliberately source from different geopolitical regions to avoid supply dependencies on individual countries, including China,” he said.