The context of the Energy Transition

INTERVIEW WITH STEFAN KAPFERER, CEO 50HERTZ

A stable and secure grid around the clock

GRI 201-2

As transmission system operators, we are just as committed to the goals of the Paris Agreement as other players in politics and business. We see ourselves as a service provider to ensure a stable and secure electrical system around the clock while the share of renewable energies in the energy supply increases steadily. This is a responsible task. Public authorities and society in general count on our expertise. They see us as their trusted advisor.

€4.2

billion

50HERTZ HAS LAUNCHED AN INVESTMENT PROGRAMME OF €4.2 BILLION FOR THE NEXT FIVE YEARS How can 50Hertz support the ambitions of the European Green Deal?

Stefan: “The strength of Elia Group lies in the variety of different market designs we have to deal with, different perspectives we can share and of course, the different cultures which we can learn from. The mere fact that our headquarters are located in Berlin and Brussels speaks for itself. No other TSO in Europe has this presence in two capitals. As far as 50Hertz operational contribution is concerned: no other TSO has such a large share of fluctuating electricity volumes from wind and solar power in its grid. In 2019, we had around 60% of our electricity consumption coming from renewables, which is one of the world’s highest shares. In our grid area, we expect to achieve the German federal government's 2030 target of 65% renewables within two years.”

Stefan Kapferer (54) has been 50Hertz CEO since December 2019. Prior to this, he was Chief Executive Officer of the Federal Association of the Energy and Water Industries (BDEW), Deputy Secretary-General of the Organisation for Economic Cooperation and Development (OECD) in Paris (2014 to 2016) and from 2011 to 2014 he was State Secretary in the Federal Ministry of Economics and Energy. Stefan Kapferer was born in Karlsruhe and studied administrative sciences in Constance. Major challenges of the energy transition according to Stefan Kapferer

• To secure and technically implement grid optimisation, grid reinforcement and grid expansion with the required capital. • To ensure system stability in an increasingly decentralised digital energy world. • To work cost-efficiently and transparently so that the financial burden on end consumers is kept within reasonable limits. • To invite the people that live close to infrastructure projects to engage in dialogue to generate understanding.

Without civil society, the energy transition will not work the way politicians and the industry wants it to.

“The mere fact that our headquarters are located in Berlin and Brussels speaks for itself. No other TSO in Europe has

this presence in two capitals.

Stefan Kapferer

What are currently the biggest challenges?

Stefan: “The German government has now decided on a clear timetable to phase out coal-fired power generation by 2038 at the latest and then to secure the electricity supply mainly through renewable energies and flexible gas power plants. This is an enormous task. So far no one can reliably say where all the electricity needed for private households, for industry and increasingly also for heating and transport sectors will come from. For us as a transmission system operator, this poses several major challenges.

“In our grid area, we expect to achieve the German

federal government's 2030 target of 65% renewables within two years.

Stefan Kapferer

Why is there a need for grid in times were generation becomes more decentralised?

Stefan: “The energy transition will only be succesful if we all collaborate and use all the available potential. And we as TSOs and DSOs have a key role to play: it won't work without us. Incidentally, a scientific association recently recorded this with a clarity I wouldn’t have expected. ‘Without the grid expansion, the energy transition will fail,’ says the German scientific elite in a recently published paper. And that's why we deliver. 50Hertz has launched an investment programme of €4.2 billion for the next five years. It includes onshore projects such as the SuedOstLink and the Berlin cable diagonal, as well as the important offshore grid connections Ostwind 2 & 3 and the HansaPower Bridge interconnector to Sweden. Offshore will become increasingly important because wind turbines at sea have higher fullload hours and are perceived by the public as less disruptive. This investment programme naturally also requires an adequate and responsible regulatory framework.” What else is needed to make this huge task a success?

Stefan: “Grid expansion alone is not enough. We urgently need innovations in hardware - from cables to substations - and also in software, in other words in the markets. Before we build a new line, we need to better utilise and optimise the existing grid. We are doing this using the latest technology, but there is still a lot of research and field testing to be done. And in times of nuclear and coal phase-out, we need new equipment such as phase shifters, reactive power compensation systems and intelligent data management. The topic of ‘energy storage’ will also gain momentum, both in the smart home context and at the Power-to-X level - I am convinced of that. Intensive, trusting cooperation between grid operators at various levels and large industrial electricity consumers is essential.”

Sustainable actions in the interest of society

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Our planet and all mankind face the serious challenge of finding answers to the problems of climate change. Industry plays an important role in this and is called upon worldwide to follow the guiding principles of the United Nations. The Sustainable Development Goals, to which the Elia Group is also committed, represent a globally crosslinked strategy to meet these challenges on an economic, social and ecological level.

A carbon-neutral economy is an essential part of this global strategy. The Elia Group makes a significant contribution to this by enabling the integration of renewable energies and thus the energy transition. To this purpose, we develop the transmission grid to meet demand and enable transparent and non-discriminatory market integration for all parties. In addition, we have set ourselves specific targets and measures to make our core business even more sustainable. The Elia Group is committed to reduce its direct CO2 emissions, to increase biodiversity around its assets and its lines, and to continuously improve its occupational safety and diversity objectives. In the future, we will increasingly work on concepts for the circularity of our materials used and the eco-design of our assets.

“Our vision already states: we as a transmission system operator are committed to sustainable development in the

interest of society. It is therefore natural for us to focus on our contribution to the global development goals of the

United Nations. This results in opportunities for us and for society, which we want to actively manage. And of course we always keep an eye on the risks.

Marco Nix, Chief Financial Officer 50Hertz

Please visit www.eliagroup.eu/en/publications to consult the full 2019 Elia Group Sustainaility Report. “ One of the greatest challenges for society is climate change. Since we are enabling and facilitating the energy transition

through grid development, providing the appropriate market design, supporting electrification of mobility, etc. sustainability is already at the core of our strategy. At the same time, we are setting up objectives and concrete actions to make our own business sustainable: limitation of direct CO2 emissions, introducing concepts of circularity and eco-design in our assets, enhancing biodiversity surrounding our installations, introducing concrete safety targets, a safety culture and working on diversity targets.

Ilse Tant, Chief Community Relations Officer Elia

In 2018, the Elia Group had decided to widen its view on sustainable business management and to integrate the Sustainable Development Goals (SDG) into a sustainability framework. In a first step, 11 of the 17 internationally valid sustainability goals were identified and clustered from top and high to medium priority.

In order to better understand the risks and opportunities that SDGs present for their own business activities, 50Hertz and Elia launched a quantitative assessment along the value chain in the 2019 reporting year. This allowed the 2018 perspective, which only took into account their own operations, to be fundamentally expanded. The science-based approach of the S&P Global consulting subsidiary Trucost was assigned for the analysis. The internal prioritisation was completely confirmed by the analysis (for the highest priority) and also largely confirmed for the high priority. Sustainable development goals In 2015, the international community of states represented by the United Nations has agreed 17 goals for sustainable development. Within the context of Agenda 2030, these global goals, which apply equally to all states, are intended to reduce inequalities, promote equal opportunities and stimulate sustainable economic growth. All - governments and companies alike - are called upon to meet this challenge, but also to focus on opportunities and risks and tap the potential of sustainability.

Opportunities:

Risks:

The Elia Group has a strong, positive influence on SDG 7 "Affordable and Clean Energy" with its business model of increasingly integrating sustainable energies into the grids. At the same time, this also creates positive influences that lead to sustainable cities and communities (SDG 11). The Group contributes to a good employment situation and stable growth in the various regions of its grid areas, thus strengthening SDG 8 "Decent Work and Economic Growth". Overall, Elia Group's business activities and revenues contribute 100% positively to SDGs.

This positive influence is offset by both opportunities and risks, the alignment of which with the corporate strategy is carefully examined. These include, for example, more intensive investigation of the effects of climate change and other related risks on the Group's own business activities and those of the supply chain.