The Grid Is The Weak Link.
In a Nov 2023 report the IEA effectively declared that grid development/updates are falling behind the pace needed for a secure energy transition and for the system resilience we all desire in the face of a changing climate. The report lays out that, as we all can agree, electricity grids are essential for enabling clean energy transitions, but currently do not get enough attention and risk becoming a bottleneck. Grids need to expand and modernize rapidly.
Under countries' climate pledges (the Announced Pledges Scenario or APS), electricity demand would grow 20% faster over the next decade than the previous one with wind and solar's share of capacity with growth of over 80% in the next 20 years. This growth will require major grid buildout and modernization. Achieving climate pledges requires adding/upgrading over 80 million km of grids globally by 2040 - equal to the world's entire existing grid length.
The report highlights that the current state of affairs is that our total grid length almost doubled over the past 30 years to nearly 80 million km in 2021, concentrated in distribution grids connecting end users. Data gathered by IEA offers that grid investment has remained steady at around $300 billion per year for over a decade, while renewable energy investment has nearly doubled. Unfortunately, over 3,000 GW of renewable projects are awaiting grid connection, 1,500 GW of which are at advanced stages. This is 5 times the solar and wind capacity added in 2022, showing grids are becoming a bottleneck.
The report cautions that grid planning processes need significant improvements to support energy transitions, including enhanced scenario analysis, stakeholder engagement, improved regional coordination, and stronger links with long-term targets. That being said, policy initiatives are emerging to boost financing for grid investment, remove barriers through permitting and regulatory streamlining, and foster societal acceptance. But investment plans often still fall short of needs.
A caveats expressed in the document includes one about the lack of good data on global historical grid length data. The report pieces together information from multiple sources to provide the first comprehensive estimates.
The report goes on to highlight that supply chains for key grid components like transformers and cables are already showing strains that could pose risks to future grid development. For example, procurement times for some large power transformers have risen from 11 months pre-pandemic to over 18 months now.
Permitting and construction for a single extra-high voltage transmission line can take 5-13 years in advanced economies, compared to 1-5 years for a wind or solar farm. This signals challenges for grid infrastructure to keep pace.
Some key recommendations made in the report include
Bring planning up to date through better coordination and robust scenario building.
Unlock investment via targeted funding, and updating remuneration schemes. The report describes an evolution underway globally towards more balanced, multifaceted remuneration frameworks that incentivize cost-effective reliability and quality and technology adoption - moving away from models biased towards capital spending alone.
Address barriers to efficient grid use and timely expansion including permitting, societal acceptance, and improved use of existing infrastructure.
Secure supply chains via transparency, standardization, training programs, and cyber security.
Leverage digitalization while managing cyber risks. Holistic risk management spanning utilities, connected devices, and robust legislation are required to counter vulnerabilities.
Cultivate a skilled workforce through training programs and integration of digital skills. Building talent pipelines, integrating digital skills in curricula, incentives, apprenticeships, and reskilling are necessary now.
A final note from me: why do the companies and entities that are looking to bring more renewables onto the grid need to connect to the current grid? Why aren’t we just building or letting companies or communities build their microgrids and have the government manage the grid for those who cannot afford to build their own? In a world where there are corporations that can fund execute on the billions of dollars (in shortfall) of infrastructure and capacity that is required to get us beyond the transition I believe a policy change that would be beneficial to all is the true deregulation of the distribution and transmission layer of the utility stack. But we seem to be unwilling to go as fas as it necessary here…
The IEA report can be accessed here.