WEBVTT 00:00:00.240 --> 00:00:03.314 The energy transition is continuing at pace and in Belgium, 00:00:03.314 --> 00:00:07.515 we're seeing the impact of this and other developments such as the growth of data 00:00:07.515 --> 00:00:09.360 centers show up clearly on the grid. 00:00:10.400 --> 00:00:13.600 The number of projects applying for a connection has skyrocketed. 00:00:14.800 --> 00:00:16.902 Today, just like in many other markets around 00:00:16.902 --> 00:00:17.360 the world, 00:00:17.800 --> 00:00:21.704 the transmission grid queue is nearly five times larger than peak electricity 00:00:21.704 --> 00:00:25.609 demands with connection applications coming from data centers, batteries, 00:00:25.609 --> 00:00:27.720 electrification projects and generation. 00:00:28.720 --> 00:00:32.811 That pressure is creating challenges. Not only in processing connection requests, 00:00:32.811 --> 00:00:36.600 but also in delivering the physical infrastructure needed to support them. 00:00:37.520 --> 00:00:41.273 My name is Tom, Partner at BCG, and I'm joined today by James Matthys- 00:00:41.273 --> 00:00:44.609 Donnadieu, Chief Customers, Markets and Systems Officer at Elia, 00:00:44.609 --> 00:00:47.320 the Belgian transmission system owner and operator. 00:00:50.640 --> 00:00:52.080 James, great to have you here. 00:00:52.400 --> 00:00:54.822 To start us off, could you tell us a bit more about Elia 00:00:54.822 --> 00:00:57.160 and the role it plays in Belgium's electricity system? 00:00:57.440 --> 00:00:57.800 Sure. 00:00:58.560 --> 00:01:00.960 Well, first and foremost, Tom, thanks for having me. 00:01:01.560 --> 00:01:04.760 Elia Transmission Belgium is the Belgium Transmission system operator. 00:01:05.120 --> 00:01:09.687 So we build, maintain and operate the Belgium high 00:01:09.687 --> 00:01:11.120 voltage network. 00:01:11.680 --> 00:01:18.400 Elia has a turnover of about €1.6 billion euros per year and we are about 2000 00:01:18.400 --> 00:01:19.400 colleagues. 00:01:20.080 --> 00:01:22.842 Elia Transmission Belgium is part of the Elia Group, 00:01:22.842 --> 00:01:26.699 which in addition to Elia Transmission Belgium also owns 50Hertz, 00:01:26.699 --> 00:01:30.192 which is one of the four transmission system operators in Germany, 00:01:30.192 --> 00:01:34.205 as well as Elia Grid International, an international engineering consultancy 00:01:34.205 --> 00:01:36.760 company and some other non-regulated activities. 00:01:37.720 --> 00:01:39.480 Let's talk about what you see on the ground. 00:01:39.840 --> 00:01:43.320 In our report, Mind the Queue, we identified two structural bottlenecks. 00:01:43.680 --> 00:01:47.561 First, grid connection studies, which today are still mostly being 00:01:47.561 --> 00:01:50.169 performed, you know, one by one, first come, 00:01:50.169 --> 00:01:54.920 first served without prioritizing those that are further along or more impactful. 00:01:55.280 --> 00:01:58.111 And second, physical connection delivery where 00:01:58.111 --> 00:02:02.388 infrastructure build out is being slowed down by resource constraints, 00:02:02.388 --> 00:02:05.280 permitting delays and supply chain bottlenecks. 00:02:05.920 --> 00:02:09.990 James, from your perspective, what do you see as the main drivers 00:02:09.990 --> 00:02:13.320 behind the growing grid queues in Europe and Belgium? 00:02:14.120 --> 00:02:16.064 Well, I think the study Mind the Queue 00:02:16.064 --> 00:02:17.760 resonated very well, with us. 00:02:18.520 --> 00:02:20.840 Let's focus on the studies first. 00:02:21.480 --> 00:02:23.980 So also in Belgium, we definitely noticed a surge 00:02:23.980 --> 00:02:24.480 in studies. 00:02:24.480 --> 00:02:30.640 We've moved from about 45 studies in 2020 to probably around 280 studies this year. 00:02:31.320 --> 00:02:35.640 What you should know is that performing a connection study, requires very 00:02:35.640 --> 00:02:36.720 specific expertise 00:02:36.720 --> 00:02:39.779 and it's quite complex, both in terms of expertise, 00:02:39.779 --> 00:02:41.520 but also in terms of tool chains. 00:02:42.200 --> 00:02:45.560 We have doubled the team in charge of the study. 00:02:45.560 --> 00:02:49.863 But the ever increasing amount of studies combined also with the fact that it needs, 00:02:49.863 --> 00:02:52.800 it takes at least one year to train, to train the people. 00:02:54.400 --> 00:02:57.963 Yeah, leads to a, leads to a situation where today average 00:02:57.963 --> 00:03:03.036 waiting time is probably around 200 days, which is much longer than what it 00:03:03.036 --> 00:03:03.640 should be. 00:03:05.160 --> 00:03:10.040 The reason for the surge is in my view, threefold. 00:03:10.200 --> 00:03:13.580 We did expect an increase of studies obviously as a result of the 00:03:13.580 --> 00:03:16.550 electrification, but there are three additional reasons I 00:03:16.550 --> 00:03:16.960 believe. 00:03:16.960 --> 00:03:20.096 First, speculation, and I think you also hinted 00:03:20.096 --> 00:03:24.501 at it in your study, grid hosting capacity has become a scarce 00:03:24.501 --> 00:03:29.040 resource whilst reserving grid hosting capacity is almost for free. 00:03:29.360 --> 00:03:33.280 So as a result of that, we see a lot of speculative demands. 00:03:33.760 --> 00:03:36.835 Secondly, we also think that the drop in storage 00:03:36.835 --> 00:03:41.732 costs combined with a clear first move advantage with respect to the storage 00:03:41.732 --> 00:03:42.360 economics. 00:03:42.360 --> 00:03:47.961 So the first on the grid will probably have the highest profit leads also to a 00:03:47.961 --> 00:03:53.847 surge in connection requests for storage, much more than what was anticipated a few 00:03:53.847 --> 00:03:57.960 years ago in the framework of the grid development plans. 00:03:58.160 --> 00:04:01.436 Back then, the general consensus was that we would 00:04:01.436 --> 00:04:04.520 have three gigawatts of storage in Belgium by 2034. 00:04:04.760 --> 00:04:07.991 Today, we have already for 10 gigawatts of 00:04:07.991 --> 00:04:14.080 capacity reserved for batteries and we have another 20 gigawatts in for studies. 00:04:14.800 --> 00:04:18.223 And then the last one for the third one is the explosion of connection requests 00:04:18.223 --> 00:04:19.480 with respect to data centers. 00:04:19.800 --> 00:04:23.593 Here again, I don't think the industry did expect 00:04:23.593 --> 00:04:27.160 such a big need for need for hosting capacity. 00:04:27.760 --> 00:04:32.186 We anticipated or I would say the societal consensus when it comes to data 00:04:32.186 --> 00:04:36.200 centers in the grid development plans was 8 terawatt hours by 2034. 00:04:36.560 --> 00:04:41.625 Today we have already for 17 terawatt hours of study requests of capacity 00:04:41.625 --> 00:04:46.280 reserved for data center and another 50 terawatt hours in study. 00:04:46.960 --> 00:04:50.351 Now, in the report, we outline a menu of 17 possible levers 00:04:50.351 --> 00:04:53.972 that grid operators, regulators and policy makers can consider 00:04:53.972 --> 00:04:55.640 to address these bottlenecks. 00:04:56.920 --> 00:05:00.109 Some of these levers have been implemented widely across many markets 00:05:00.109 --> 00:05:00.520 globally. 00:05:00.560 --> 00:05:05.357 For example, queue hygiene measures, batch processing and flexible connections, 00:05:05.357 --> 00:05:10.031 whereas other levers have only been considered in selected markets around the 00:05:10.031 --> 00:05:10.400 world. 00:05:11.000 --> 00:05:14.562 And so it's clear that while multiple levers have to be pursued in parallel, 00:05:14.562 --> 00:05:16.320 there's no one-size-fits-all playbook. 00:05:17.120 --> 00:05:20.145 The optimal combination of levers depends on local context, 00:05:20.145 --> 00:05:21.960 local situation and starting points. 00:05:23.800 --> 00:05:27.840 What are the levers that Elia has already implemented in Belgium to date? 00:05:27.840 --> 00:05:31.648 And what are some of the new levers that you'd like to investigate or implement 00:05:31.648 --> 00:05:33.600 for both short term and long term impact? 00:05:34.280 --> 00:05:36.680 So I'll make a distinction between long term and short term. 00:05:36.680 --> 00:05:41.310 And when focused on the long term, I think one had to focus on what can we 00:05:41.310 --> 00:05:45.496 do first and foremost and what more structural reforms should be, 00:05:45.496 --> 00:05:50.000 should be taken in consultation with stakeholders and politicians. 00:05:50.000 --> 00:05:51.120 So first, what can we do? 00:05:51.120 --> 00:05:53.440 Well, we have to accelerate CapEx delivery. 00:05:53.600 --> 00:05:59.040 We've moved from €330 million CapEx in 2020, 00:05:59.040 --> 00:06:01.000 and I'm talking here only the onshore grid, 00:06:01.120 --> 00:06:03.280 I'm not talking about our offshore investments. 00:06:04.000 --> 00:06:08.180 And that will gradually be, gradually, sorry, be ramped up to €1.4 00:06:08.180 --> 00:06:09.320 billion by 2030. 00:06:09.320 --> 00:06:13.720 So clearly times six when it comes to CapEx investment. 00:06:14.080 --> 00:06:18.520 The second thing is that obviously we have increased our study capabilities. 00:06:18.560 --> 00:06:21.720 I have the teams have been multiplied by two. 00:06:21.920 --> 00:06:26.782 We are looking at artificial intelligence also to make sure that we can develop or 00:06:26.782 --> 00:06:29.360 deliver our studies as swiftly as possible. 00:06:29.360 --> 00:06:33.339 It will take some time, but our ambition is clearly to move back, 00:06:33.339 --> 00:06:37.440 I would say to more reasonable timings about 40 to 60 or 80 days. 00:06:37.920 --> 00:06:40.998 And then the third thing, we have already implemented at Elia is 00:06:40.998 --> 00:06:43.320 what we call dynamic CapEx portfolio management. 00:06:43.600 --> 00:06:48.259 So we need to be much more agile in the way we allocate our resources that 00:06:48.259 --> 00:06:53.168 deliver the CapEx in function of I would say the priorities which are changing 00:06:53.168 --> 00:06:58.138 quite a bit because electrification is going, is a bit delayed in some sectors, 00:06:58.138 --> 00:07:01.680 is going much quicker than anticipated in other sectors. 00:07:01.840 --> 00:07:05.235 So we must be, we must be as agile as possible when it 00:07:05.235 --> 00:07:07.520 comes to CapEx portfolio management. 00:07:08.120 --> 00:07:09.320 So this is what we can do. 00:07:09.320 --> 00:07:14.440 And I think we are implementing this or have already implemented quite a lot of 00:07:14.440 --> 00:07:14.760 this. 00:07:15.200 --> 00:07:18.000 Then what do we have to do together with stakeholders? 00:07:18.440 --> 00:07:22.148 Three measures, which I think you also identified in your 00:07:22.148 --> 00:07:22.560 study. 00:07:22.960 --> 00:07:25.859 First, we must realign the way grid hosting 00:07:25.859 --> 00:07:30.670 capacity is allocated with the assumptions taken in the grid development 00:07:30.670 --> 00:07:31.000 plan. 00:07:31.400 --> 00:07:34.884 The grid development plan basically looks at scenarios: 00:07:34.884 --> 00:07:38.950 what does the future look like, what is the industrial policy, 00:07:38.950 --> 00:07:41.080 what are the societal objectives? 00:07:41.720 --> 00:07:45.552 This and these scenarios are turned into grid development and that's also why 00:07:45.552 --> 00:07:47.960 basically all grid users will be paying for it. 00:07:48.800 --> 00:07:51.517 When we look at today, capacity allocation is first come, 00:07:51.517 --> 00:07:52.080 first served. 00:07:52.200 --> 00:07:55.848 So there is no way that you can assure that the way capacity, 00:07:55.848 --> 00:08:00.556 hosting capacity is being taken up is in line with why or why for this capacity 00:08:00.556 --> 00:08:04.440 has been developed in the framework of the grid development plan. 00:08:04.640 --> 00:08:06.320 So we need to realign this. 00:08:06.520 --> 00:08:12.280 We have been taking initiative there also, with measures that will be announced. 00:08:13.280 --> 00:08:18.160 Second thing is that we do have also to look at these queue hygiene measures, 00:08:18.160 --> 00:08:21.200 as you say. We see too much speculation 00:08:21.200 --> 00:08:25.548 so we need to make sure that the serious mature projects can progress as 00:08:25.548 --> 00:08:29.670 swiftly as possible and are not blocked in the queue with a lot of other 00:08:29.670 --> 00:08:30.800 speculative demands. 00:08:31.040 --> 00:08:34.829 So here we are thinking of for instance, bank guarantees, 00:08:34.829 --> 00:08:39.861 We are thinking of the link between a study and the land rights on which you 00:08:39.861 --> 00:08:41.560 want to develop a project. 00:08:42.560 --> 00:08:46.520 We are also thinking about permits, what kind of permits do you do you have? 00:08:47.080 --> 00:08:51.010 So those are measures that we need to discuss that will definitely be 00:08:51.010 --> 00:08:53.756 necessary, but we cannot take those measures 00:08:53.756 --> 00:08:54.079 alone. 00:08:54.560 --> 00:08:57.480 Again, I can illustrate why this is necessary. 00:08:57.720 --> 00:09:00.880 I refer to the 70 terawatt hours of studies for data centers. 00:09:01.160 --> 00:09:04.594 Well in the study published by Boston Consulting Group back in May, 00:09:04.594 --> 00:09:08.736 the potential for data centers in Belgium is estimated between 10 and 30 terawatt 00:09:08.736 --> 00:09:09.040 hours. 00:09:09.240 --> 00:09:12.177 So it's clear that from the 70 terawatt hours of studies, 00:09:12.177 --> 00:09:14.000 not all those projects will realize. 00:09:14.000 --> 00:09:18.410 So let's make sure that we Fast forward the ones that do, that are serious and not 00:09:18.410 --> 00:09:20.400 the ones that are purely speculative. 00:09:20.680 --> 00:09:21.840 And the same holds for batteries. 00:09:22.040 --> 00:09:26.119 And there is the potential for Belgium has been estimated by EnergyVille, 00:09:26.119 --> 00:09:30.640 which is a Research Institute in Belgium between seven and eight gigawatts in 2050. 00:09:30.920 --> 00:09:33.280 Well, we have 30 gigawatts in study today. 00:09:33.520 --> 00:09:38.483 Not all this will realize. Three, clearly three measures for the short term, 00:09:38.483 --> 00:09:43.643 aligning capacity allocation with the objectives as set out in the grid plans, 00:09:43.643 --> 00:09:47.040 hygiene measures when it comes to queue management. 00:09:47.200 --> 00:09:50.920 And the last one is flexible connections. 00:09:51.240 --> 00:09:54.696 So awaiting basically CapEx to be developed, 00:09:54.696 --> 00:09:59.920 we need to be able to offer a flexible connection to our customers. 00:09:59.960 --> 00:10:04.778 If sometimes we can intervene at moments where congestion could appear on the grid, 00:10:04.778 --> 00:10:08.621 it will allow us to connect much more grid users than if we don't, 00:10:08.621 --> 00:10:10.400 if we do not have those right. 00:10:10.960 --> 00:10:11.960 So that's on the short term. 00:10:12.280 --> 00:10:15.040 But then obviously on the longer term, 00:10:15.040 --> 00:10:19.540 we believe that we and especially also the step changes in the electricity 00:10:19.540 --> 00:10:23.560 system that are the result of the decarbonization objectives. 00:10:23.760 --> 00:10:26.741 So both on the load side as well as on generation side, 00:10:26.741 --> 00:10:30.308 but also the step changes in the electricity system as a result of 00:10:30.308 --> 00:10:31.640 technological evolutions. 00:10:31.640 --> 00:10:34.029 When I look at AI, when I look at data centers, 00:10:34.029 --> 00:10:36.120 they will require a lot of power. 00:10:37.040 --> 00:10:41.621 So we need to better align industrial objective, spatial planning, 00:10:41.621 --> 00:10:47.092 energy mix ambitions and grid development so that we can make sure that what we 00:10:47.092 --> 00:10:51.400 develop is fit for purpose and also at the lowest cost. 00:10:51.520 --> 00:10:55.560 So this is long term measure #1, long term measure #2 very important 00:10:55.560 --> 00:11:00.455 Also: we need to move from a CapEx only approach to what we call a Totex approach, 00:11:00.455 --> 00:11:03.440 whereby flexibility will be part of the solution. 00:11:03.520 --> 00:11:06.664 So you know, building lines or putting cables under 00:11:06.664 --> 00:11:11.381 the ground cannot be the solution for everything because it will take 00:11:11.381 --> 00:11:13.680 too long and it will be too expensive. 00:11:14.400 --> 00:11:18.876 And so having flexibility also as part of the solution in the way we build out the 00:11:18.876 --> 00:11:20.440 grid is definitely important. 00:11:20.600 --> 00:11:24.764 And with those two long term measures, I hope we can facilitate the energy 00:11:24.764 --> 00:11:28.040 transition and also look after what we call affordability. 00:11:28.400 --> 00:11:32.126 So James, we've covered a lot, from what's driving 00:11:32.126 --> 00:11:37.940 Grid connection queues, to what are some of the potential levers and solutions to 00:11:37.940 --> 00:11:40.400 address them. Now, before we close, 00:11:40.640 --> 00:11:44.200 what makes you optimistic about the direction we are heading into? 00:11:44.520 --> 00:11:47.014 And also, what would be your message to those 00:11:47.014 --> 00:11:49.563 developers that have ambitions, plans in mind, 00:11:49.563 --> 00:11:53.360 but that require a connection and are still stuck in the queue today? 00:11:54.800 --> 00:11:59.720 Well, twofold, I think, first, why am I optimistic? 00:11:59.760 --> 00:12:02.280 Well, first is that we're all in this together. 00:12:02.680 --> 00:12:06.159 And when I look at the reactions from politicians, 00:12:06.159 --> 00:12:11.206 when I look at the reactions from regulators, but also from stakeholders, 00:12:11.206 --> 00:12:16.868 I think that everybody understands that we can only solve this, the issues 00:12:16.868 --> 00:12:19.119 we are seeing today, all together. 00:12:20.040 --> 00:12:22.503 And then so your study, but also what the, 00:12:22.503 --> 00:12:25.840 the measures we propose are being discussed already as we speak. 00:12:25.840 --> 00:12:29.560 So that, you know, I think that's a very positive signal. 00:12:30.360 --> 00:12:33.560 We cannot have the grid immediately everywhere all the time. 00:12:33.600 --> 00:12:37.046 That would be unaffordable and also impossible to realize because the lead 00:12:37.046 --> 00:12:37.920 times are very big. 00:12:38.160 --> 00:12:40.880 So we need some smarter solutions. 00:12:41.320 --> 00:12:45.108 And then when it comes to, I would say people that do have plans, 00:12:45.108 --> 00:12:48.781 that do have ambitions, is please inform us as soon as possible 00:12:48.781 --> 00:12:51.651 if you want, if you have big plans in the future, 00:12:51.651 --> 00:12:56.415 we need to know it in advance because we need to be able to build the grid so that 00:12:56.415 --> 00:12:58.080 we can facilitate your plans. 00:12:59.160 --> 00:13:03.000 And that's it's something that has not happened always in the past. 00:13:03.000 --> 00:13:05.160 In the past, the grid was taken for granted. 00:13:05.160 --> 00:13:08.640 When grid capacity was asked, the answer was always yes. 00:13:09.280 --> 00:13:13.389 But with the step changes we see now in power connection requests, 00:13:13.389 --> 00:13:17.954 we need to know in advance because we will have to build new grid to facilitate 00:13:17.954 --> 00:13:18.240 that. 00:13:18.320 --> 00:13:22.950 And if we don't know what the needs are, it will be very difficult also not only 00:13:22.950 --> 00:13:26.552 to, to design the grid, but also to justify the investments in 00:13:26.552 --> 00:13:30.040 that grid if we cannot clearly link it to specific needs. 00:13:30.680 --> 00:13:32.320 James, thanks so much for joining me today. 00:13:32.320 --> 00:13:33.680 It's been great to hear your perspective.