As a result of the energy transition and the electrification of the economy, pressure on the existing electricity grid is increasing rapidly in the Netherlands. In 2022, just over 650 businesses were waiting for a grid connection; today that number has risen to more than 14,000. Alongside the nitrogen crisis, grid congestion has become one of the most significant obstacles to economic growth and societal development. Along with businesses being unable to start or expand, the construction of housing, schools, and other public facilities is also being delayed by the waiting lists of grid operators.
In the coming years, tens of billions of euros are earmarked for investments to reinforce the power grid. However, these investments will only create limited additional capacity, and only very slowly. It is therefore not surprising that many actors are turning to local solutions that are available in the short term and that may also prove more efficient in the longer run.
Grid operators, the national government, and the Authority for Consumers and Markets (ACM) are trying to facilitate this development, but at the same time they are losing some of their control over the system. In other words: control is shifting from central actors towards the edges of the network, and a partial decentralization of the energy system is taking shape. In the past, this form of decentralization was primarily an ideological ambition based on values such as democracy and equality. Today it has become a hard necessity for solving very practical problems and sustaining economic growth.
The energy transition is well underway. The share of renewables in the energy mix of developed economies is rising rapidly. Successful schemes to support the development of offshore wind parks and dropping prices of solar panels make renewable sources account for one fifth of the total energy consumption in the Netherlands. Simultaneously, our economy is electrifying thanks to heat pumps and electric vehicles.
These developments are impressive, but at the same time two challenges are becoming more urgent: the unpredictability of renewable production and a power grid that is reaching its limits. Net congestion is no longer just a technical term—it is increasingly determining what is possible and what is not.
What makes this problem fundamentally challenging is that it is not primarily driven by growth in total electricity consumption, but by the mismatch of local demand and production. In the case of homes, electric vehicles, heat pumps and solar panels all reinforce each other’s peaks. Households charge cars when they come home, heat their homes in the evening and generate solar power at midday when demand is low. Even if the total amount of electricity produced over a year is sufficient, the system is stressed by short but extreme mismatches between supply and demand. Building a grid that can handle these peaks everywhere would be enormously expensive and would leave most of that capacity unused for most of the time. In the context of businesses, or in the case of EV fast-charging, irregular bursts of power demand cannot readily be provided by the existing grid, nor by a solar roof with a relatively constant, yet low-power output.
The system’s response to this challenge is to increase net capacity by adding high-power lines and substations. This, however, is a very costly and time-consuming effort, certainly when one considers the fact that the grid is only congested during a relatively small part of the day. A much more promising route is to develop a more flexible energy system that reduces peak demand and has a higher utilization rate throughout the day.
In economic terms, flexibility is far more efficient than brute-force expansion. Reinforcing the grid means investing in infrastructure that is only needed for a few hours per day, while flexible demand, storage, and local balancing allow the same cables and transformers to serve many more users. Every kilowatt of peak demand that can be shifted or locally absorbed saves thousands of euros in network investments. Decentralized solutions, such as shared batteries, smart charging, and local energy markets, therefore do not just solve technical problems; they fundamentally change the cost structure of the system.
To achieve such flexibility, local solutions, and hence decentralization of the energy system, appears to be the most promising and sensible route.
Ironically, for many years, the decentralization of the energy system was mostly an idealistic dream. It was the alternative vision to the centralized system of the previous century. Supporters imagined neighborhood microgrids, with roofs full of solar panels, and local energy cooperatives that would both green and democratize the system. However, in reality the energy system did not develop in this direction. The strongest growth in renewables came from large offshore wind parks and, to a lesser extent, from solar farms. Projects that, in their scale and organization, strongly resembled the centralized energy system they were meant to replace. As such, the energy transition has largely become a corporate project, in which companies benefit most from green energy investments (and subsidies), while participation by citizens is largely limited to a small, affluent group.
This was to be expected; centralization has always been a dominant trend in the development of energy systems. The first electricity systems were local: a watermill powering a few workshops, a steam generator providing electricity to one street. Yet, over time these small networks were connected to each other to create national, and eventually international, grids that provided more stability and brought benefits of scale.
What is different today is that sensors, power electronics and smart technologies make it possible to coordinate many small producers and consumers in real time. Where decentralization in the past meant fragmentation and inefficiency, decentralization today can be highly coordinated. In effect, we are not returning to isolated micro-grids, but creating a layered system in which local optimization and global exchange can coexist.
And this time, decentralization is not driven by ideology but by necessity. Because of grid congestion, long waiting times for new connections, and fluctuating renewable production, households and companies are increasingly organizing their energy production and use collectively and locally. People, with the help of energy management systems, are starting to time the charging of their electric cars or the use of heat pumps to match their own, or collective, solar generation. Businesses are developing energy hubs to reduce their dependency on the grid. Likewise new building projects rely on innovative solutions to lower their toll on the grid or stay off the grid altogether. Increasingly, batteries play a key role in these solutions, by offering a means to reduce peak loads on the grid and to make better use of one's own energy production.
With this trend, decentralization is no longer an abstract concept, it is becoming a practical response to very concrete challenges.
Interestingly while this decentralization is mostly driven by practical concerns, it does mark a political shift. Control over the grid is slowly but surely shifting from central actors to the edges of the network. Instead of waiting for solutions from government or grid operators, citizens and entrepreneurs act themselves. And with this action comes a certain degree of power. Actors cooperating in an energy collective or around an energy hub can decide themselves (within legal boundaries) how to distribute energy between them, and how to organize investments and payments.
Grid operators and governments are, reluctantly, trying to support local solutions, but they are clearly no longer in the lead. This is no surprise as they are not used to sharing control with others. As one entrepreneur says, grid operators are basically one-trick ponies that struggle to think beyond cables and transformers. Along with their reluctant cooperation, legislation is being adjusted to give energy communities an official status and make their life easier and to push grid operators to support local initiatives. The national government, for instance, prescribes that grid operators should sign new types of contracts with energy producers and users that reward them for investing in local solutions to grid congestion. These contracts incentivize local actors to cooperate, share assets (such as batteries) and, as such, form their own micro-grid.
In this way, democratization is happening almost by accident: not as part of a grand strategy, but rather as something that emerges out of everyday problem-solving.
This shift is subtle but profound. When energy users become co-owners of batteries, charging infrastructure, or local grids, they gain a stake in how the system operates. Decisions about investments, pricing, and priorities move from distant institutions to local collectives and cooperatives. This does not eliminate the role of the state or grid operators, but it does turn them into partners rather than sole decision-makers. Energy, once one of the most centralized sectors of the economy, starts to resemble a shared infrastructure governed from many points at once.
Will this trend continue? Large parts of the energy system will remain centralized and most of the planned investments in the grid will be geared towards more cables and transformers. Also, further European integration to enable renewable power to flow across the continent. Yet it is uncertain whether such reinforcements will come quickly enough and it is very likely that businesses and citizens will not wait for these and invest in their own solutions. Local smart solutions simply offer many advantages and once these benefits become embedded in business parks and neighborhoods, users will not give up on them. Again, with these local investments, also comes some degree of decentralized power and democratization of the energy system. As a result, the centralized energy infrastructure may expand, but the decentralized layer will not disappear; it will remain an integral part of how people produce, store and share energy.
