Grid congestion is growing across Europe due to surging electricity demand from fossil fuel phase-outs, rapid renewable energy growth and insufficient grid investment and efficiency, writes Matthew Stevens
Power grid congestion is a well-documented phenomenon across a number of European countries, with the Netherlands and Germany being prime examples.
This is a result of a combination of factors, including an overall increase in electricity consumption as countries move away from fossil fuels, the rapid growth of renewable energy, which relies on power grids, as well as the inefficient use of existing capacity and insufficient investment into associated infrastructure.
What’s at stake for the logistics sector?
The implications of grid congestion are far-reaching – from increased energy costs to limits on what, where and how quickly developers can build. Reliable and consistent power supply is a growing priority in the logistics sector as tenants look to reduce their carbon footprint while requesting features such as EV charging and automation.
This challenge cannot be addressed and resolved overnight – upgrading existing infrastructure takes time, and investing in new transmission lines is costly and requires a concerted effort at the government level. In the meantime, the demand for new logistics units remains strong, fuelled by our reliance on e-commerce, the ongoing quest for supply-chain optimisation and the importance of global trade.
What this means is that forward-looking logistics developers have no choice but to take matters into their own hands or risk missing out on market opportunities.
Clean-energy solutions can be the answer
Sunrise Real Estate faced this issue when developing Amsterdam West Distribution Centre (AWDC), its first major logistics project in the Netherlands. The 19,660sqm facility was completed in Q4 2024. However, a grid connection was unavailable until Q1 2025 due to congestion issues.
Instead of installing a temporary off-grid system during the construction phase, the team partnered with energy providers Sunrock and iWell to deliver an innovative solar energy and battery solution which has allowed the tenant, a furniture and design firm, to begin its operations months earlier than planned, without a permanent power connection.
In addition to providing a reliable and sustainable energy source, such solutions can be used for energy distribution once the grid connection becomes available. Moreover, once the facility gets connected to the grid, the battery can be traded on the energy market, resulting in an additional income stream for the property operator.
AWDC also benefits from a smart energy management system, which uses machine learning and AI to manage energy flows, ensuring a reliable energy supply and helping avoid unnecessary energy expenditure. Once connected to the grid, the building will be powered by 2MWp roof-mounted solar PV and a small grid connection, which will provide sufficient power for the tenants. This will result in approximately 50% of AWDC’s energy requirements being provided by renewable energy.
We have also integrated a comprehensive metering system, providing detailed monitoring of each system component and individual sub-metering for each of the four units on site. This enables operators to track consumption patterns, analyse tenant usage profiles, and identify opportunities for optimisation.
For the landlord, it offers clear, accurate data to fairly allocate electricity costs among tenants. It’s the first such system to have been installed in the Netherlands to address grid constraint issues.
It took Sunrise Real Estate and its partners nearly four months to develop the scheme for AWDC and tailor the system to the tenant’s consumption patterns, with installation and testing taking a further four months.
Our key consideration before embarking on this project was ensuring the building could accommodate enough solar PVs on site to meet the tenant’s energy demand. Because the facility was built from scratch, we were able to adapt the building design to ensure the roof could withstand the required level of PV loading.
The case for reinventing the wheel
There are, of course, other, simpler alternatives – for example, having a full-time on-site power generator. But that has significant drawbacks, including the emissions that the generator would produce, the additional fuel costs and the need for constant maintenance to ensure the system is adequately fuelled.
Unsurprisingly, a more sophisticated solution necessitates substantial investment to cover the cost of the batteries, the PV panels and the additional works required on-site. It is also important to allocate enough time to such a project, to closely collaborate with the incoming tenant and engage tried-and-tested energy consultants.
In our case, the result was worth it – the tenant was able to begin its operations months before the facility got connected to the grid, and we have successfully achieved a reduction in the building’s CO2 emissions.
Grid congestion is a complex issue for which there is no immediate fix, and that is precisely why we, as logistics developers and investors, need to step in with more creative solutions or face delays or outright stagnation.
To read the latest IPE Real Assets magazine click here.
