Expert insights on Energy’s next decade

Celebrating its 10th anniversary, Axpo Netherlands reflects on a journey of growth and innovation. From its earliest days, the Amsterdam-based subsidiary has been a significant player in the Dutch energy sector. The team has skilfully navigated a dynamic environment, characterised by the rise of power purchase agreements (PPAs) and evolving subsidies, to build a loyal customer base thanks to its dynamic and dependable entrepreneurial ethos. 

Since securing its first PPA in 2015, Axpo has facilitated numerous deals between developers and off-takers, relying on strategic partnerships with independent energy suppliers, a flexible, non-hierarchical structure, and a robust commitment to innovation. Looking ahead, Axpo Netherlands remains focused on advancing the energy transition through renewable PPAs, market access, risk management and support for industrial, corporate and large public energy consumers, as well as providing power and natural gas supply services. 

In celebrating this milestone, we tap into Axpo Netherlands' reading of today’s energy challenges and share their insider’s view on future market developments.

Bram Van der Lee, Head of Portfolio Management  

The energy transition is in full swing, with pressure on utilities, producers and consumers to deliver it higher than ever. What do you see as the biggest challenges in the next 10 years and how can market participants manage this wide range of risks? 

We see dramatic market changes: renewables are skyrocketing and simultaneously, especially in the Netherlands, gas is being phased out. Huge investments in the electricity grid are necessary to cope with the increase in renewables. It would be ideal to have local flexibility, both on the supply and demand side. 

Energy consumers will become increasingly aware of the differing electricity prices depending on the time of day, and contracts may reflect this – both for individuals, who will turn on the washing machine when the sun is shining, and for bigger companies that previously took energy for granted. 

In the end, we must set the right incentives and provide the right information to let energy consumers and producers make the right decisions. This is easier for bigger companies as Axpo can structure this flexibility into an energy contract. But ultimately old-style companies might struggle as their competitors discover that it is not only a risk but an opportunity too. 

I am confident about the future. In 10 years, the situation will be better than today. We may face some tough times with market tightness and increasing costs. But in the end higher costs will attract new investments and change customer behaviour. For a lot of our problems, solutions are already available. 

Siddharth Unni, Senior Originator

What trends will dominate the power purchase agreement market ten years down the line? 

Ten years ago, most renewable assets were built with subsidies, meaning that the long-term revenues of an asset were guaranteed by the Dutch government. Now we see subsidy-free offshore wind in the Netherlands and will likely see other renewable technologies follow this trend. As a result, producers will need to find other ways of securing long-term asset revenues. Therefore, the need for off-takers, producers and utilities to collaborate and find creative solutions will be greater than in the past.  PPAs will likely become a more common product and no longer just for front-runners in the energy transition. 

If you’re signing a PPA ten years from now, how different will the process be from today? 

PPAs will become a market standard. A lot of what we do today is still bespoke, tailored to each customer’s individual needs. In a decade, there will probably be some boilerplate contracts which streamline the process and maybe offer more price transparency. 

While we’re proud of being innovative with our products, our future offering will essentially be linked to the evolution of market trends and customer demand. Axpo has always taken up the role of carrying risks that our customers are unwilling or unable to. While markets may be different ten years from now, this principle will remain at the core of our value proposition. 

Digitalisation will speed up the decision-making and contracting process – hopefully not too much, as I’d still like to have a job (he laughs). I do think the whole process will be more efficient. 

Alexander Hunink, Senior Originator 

How do you see industrials, corporates and public entities covering their energy consumption in the next decade?

Unlike ten years ago, there is an increasing focus nowadays on procuring electricity and gas. We expect this trend to continue in the coming decade as organisations pay more attention to how, when and what kind of energy they purchase. Partly driven by the market volatility of the past years, organisations are increasingly sitting in the driver's seat, seeking to understand the terms of energy purchase and exploring long-term opportunities that contribute to their sustainability and financial targets. 

As the energy landscape became more complex and energy itself in many cases became a larger part of the expenses of an organisation, energy procurement departments also increased substantially. Factor in power purchase agreements, renewable storage systems, batteries, e-boilers, demand management, and also regulation, and you can see why you need a larger body to handle the energy management of an organisation. This professionalisation of in-house energy procurement will be even more prevalent in the future. 

Additionally, more flexibility in contracts and procurement will be required. Suppliers are pushed to be more flexible and to work with end-users to create tailor-made solutions. Finally, for certain organisations we see that regional or central purchasing is becoming more common. While the complexity significantly increases at national level, implementing a regional contractual framework for supply terms, harmonised across multiple countries, allows Axpo to continue to deliver valuable solutions to our clients. 

Ross Quirke, Front Office Business Support Officer  

Entrepreneurial spirit, flexibility and transparency characterise Axpo Netherlands today. Which attributes will define the business in ten years? 

It's no longer just a straightforward PPA or full supply. With more renewables coming online, the whole system needs more flexibility. Operating on different markets – ancillary services, balancing, congestion management – can give us this flexibility. Some of these markets are still developing and changing rapidly, so it will be interesting to see where these developments take us. 

In the context of flexibility, collaboration and transparency will be critical, with companies and counterparties along the value chain sharing data on the flexibility used by an asset, as these actions are where the added value is created. By operating an increasing number of batteries on many different markets, for instance, background operations might not always be clear, so it will be crucial to trust each other, which can only come from increased collaboration and transparency.

Additionally, having developed a lot in the past two to three years, algorithmic trading will gain a lot more traction. We are using it in our daily work already. But I wouldn’t be surprised if within the next ten years machine learning became the norm, making the algorithms constantly evolve and even more advanced. Only time will tell...

Bart Janssen, Gas Portfolio Manager

Gas is a key transition fuel across the globe. What role will gas play in 2034 and how do you see the market evolving? 

While other countries are moving towards gas, the Netherlands is moving away from it – especially with the closure of the Groningen field – as the Netherlands aims to become carbon neutral. It’s a small country, and we don't have much farmland compared to France and Germany, so currently hardly any biogas is produced here. However, the Dutch government wants to increase the share of biogas to ten per cent of the current demand within the next few years. This will be pushed through legislation.

Doing business in the natural gas sector, I see biogas as a new  market that should grow rapidly in the next decade, bringing great new opportunities for Axpo. We will still have natural gas, but other gases will gradually replace it. Right now, the Netherlands is almost fully dependent on natural gas, and a major part of it will be replaced by biogas, which accounts for only around one per cent of total Dutch consumption today

Besides, on the demand side, which is likely to decrease, there's a real push to use electric heat pumps to warm houses in the Netherlands. The Netherlands has been a gas producing and exporting country in the past. So 80 to 90 per cent of its housing is heated by gas, directly or indirectly. Therefore, I expect our gas market to shrink, but it will still be there, as it is a great addition to renewables, especially for electricity production. Simply put, our power grid needs to be expanded so everybody can be supplied with electricity to heat their houses. The gas grid already exists and will be used during this transition phase where biogas will be part of the transition.

Katrijn Coninx, Head of Meter Data and Delivery Management

Forecasts of data management range from widely far-fetched and ambitious to cautious and conservative. What are your predictions for data management and analytics? Will the energy markets have fully embraced the power of AI by the middle of the next decade? 

Currently, we don't have markets where renewables’ flexibility and disruptiveness are intrinsically counteracted. This means that a lot more data from renewables is needed to manage the market as a whole. It’s still a challenge to manage so much production from wind or solar turbines that is not fixed in time but dynamic. The data that we need will keep increasing in the next few years. Also, we will engage with AI in ways we never thought of before, and it will change how we approach things.  We will do things differently, life will become easier, and that will be the case with energy data too. We will become more efficient in collecting and processing more data and converting it into useful results.

But at some point, extra data will not help anymore. Concerns are already being raised over how much power data centres consume, which is both costly and a sustainability issue. AI models are being built, but they’re not bulletproof. Developers don’t clearly define relation or causation within the model as it is assumed to be a result. These models depend on what's fed into them, and that’s always historically based. So there will be a limit to what we can achieve in the long run. 

In the end, I think creativity will remain with people. Combining multiple data feeds will allow us to be more efficient and will inspire many of us. AI is much better at mundane processing, which ultimately allows the highly educated people to do the creative, intelligent work, instead of repetitive tasks. Eventually, we will find a good balance between our data efforts and their attainable results. That's where we should move to in the next ten years. We’ll reduce redundancies by becoming more efficient in our assets’ data routes, create new ways of approaching things which should end up creeping into the market, lowering data volumes on a system level to make the entire system more efficient.

Michiel Rutgers, Managing Director  

How do you see Axpo Netherlands growing in the next ten years? 

Concerning people, we now number 12 and are moving to a new office next year with room for around 25 people. For services, in addition to supplying gas and electricity to large industrial, corporate and public users, we will continue to provide market access to retail energy suppliers and buy renewable power mostly from independent developers.

I'd like to expand into offering flexibility services too. That includes optimisation for clients who either have flexible assets or flexibility embedded in their production – full supply clients – or operators of battery energy storage systems. With more renewables in the energy mix and more volatile energy prices, this area is becoming increasingly important. 

Within five years, besides continuing to operate a sustainable and profitable business, I hope we’ve crossed from market-based transactions to taking a minority equity stake in renewable projects. We’re seeing this happening more and more in Axpo, and these would represent significant milestones for us. 

It’s a typical day in the office in September 2034. What does it look like? 

I hope we still come into the office to work, to be together, exchange ideas, have fun and socialise. And, of course, still play a game of table football after lunch (laughing). Other than that, my days are not overly structured. Currently I juggle client meetings, calls, transactions or business growth discussions with our originators, our portfolio manager, or the broader organisation. That shouldn’t change. Ongoing projects will still require our input and, despite the team growing, I hope I’ll continue to be involved in all the commercial discussions. 

Where do you personally see yourself in 2034? 

I hope I'm still heading the Dutch branch and a larger team. If not, I would see myself as an entrepreneur and if that didn’t work out, I'd be sailing full-time. In ten years, my kids will be older, so I could start making some real progress on sailing around the world!