WHY POWER GRIDS NEED URGENT INVESTMENT
Energy leaders consider grid capacity expansion the most important priority today to meet climate
targets, particularly in Europe and among those in the transmission and distribution sectors
Electrical power transmission has allowed energy companies to concentrate power production into ever-larger plants, far away from the city centres and areas they supply.
Today, that highly centralised, onedirectional model is being dismantled and reinvented — under the heat of planet-saving urgency — involving tasks of formidable scale and complexity.
“We’re now at a particular inflection point in the history of the electric power system,” says Mark Paterson, Managing Director – Australia, and Lead Systems Architect, at Strategen. “We are embarking on fundamental, structural change. So this forces us to revisit the suitability of our power grid’s underlying cyber-physicaleconomic architecture, which was designed for a very different time.”
It is a giant challenge, particularly for an industry that has been relatively stable.
“We’ve gone through so many years of gradual, iterative change, but we’re now changing at a pace that is making any orderly iteration difficult,” says Florence Silver, Policy Manager at Ofgem, the UK’s energy regulator.
“We are attempting to completely revolutionise a system — rapidly — that must keep functioning, reliably, all day, every day.”
A great deal of attention, investment, and policy is rightly focussed on clean energy generation and the decarbonisation of industry. But the role of power grids is sometimes under-appreciated and misunderstood, which could ultimately lead to the failure of an expedient energy transition — one fast enough to support the goals of the Paris Agreement.
“Europe and many other regions will see enormous stress on the grid in the coming years,” says Daan Schut, Chief Transition Officer and member of the board of directors at Alliander.
“The energy transition is driving the decarbonisation of production, adding a lot of variable renewables, and the electrification
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ELECTRICITY INFRASTRUCTURE FOR A NEW ERA
By 2050, 70% of electricity will come from wind and solar PV, compared with around
10% today. Urbanisation, population growth and economic expansion are driving up energy demand, the bulk of which will be met with electrical power. In fact, we forecast that electricity will double as a share of final global energy demand2 within the next 30 years, from under 20% to nearly 40%.
In a recent DNV survey published last month, over 400 senior energy industry leaders, professionals, and experts explored the barriers and enablers involved in developing grid infrastructure to support the energy mix of the future.
The findings reveal unequivocal alignment on the need to build a smarter, higher-capacity grid, with the flexibility to suit the evolving energy mix — and to build it quickly:
• Most of the energy leaders and experts in our survey (87%) say that there is an urgent need for greater investment in the power grid.
• Three quarters (76%) say that power grid infrastructure cannot yet adequately connect sources of renewable energy to areas of high demand.
• Over nine-in-ten respondents (91%) say that power grid expansion and upgrading is critical to meeting climate targets.
BUILDING THROUGH UNCERTAINTY
But beyond this broad consensus, there are many difficult problems and unanswered questions, such as: How will the roles of grid system and market participants need to evolve? How do we best coordinate operational control as we move from dozens to tens of millions of participating resources and where are the interfaces and hand-over points between stakeholders in the future grid?
There are many more questions like these. The energy system is being disrupted, and where there is disruption, there is always uncertainty.
“Our global literature reviews have found volumes of studies that catalogue the huge challenges now confronting our legacy
power systems. However, beyond high-level aspirational targets, we found comparatively few efforts that set out detailed, robust, and actionable views of the future power system that we might be wanting to create,” says Mark Paterson from Strategen.
“The danger is that we’re facing a once-acentury scale transformation, potentially upending the whole electricity sector, and pouring in train-loads of money, but we have an inadequate view of what – positively, and in detail – we’re building towards.”
Despite the uncertainty, the industry understands that grid expansion and upgrades must continue.
The DNV survey asked respondents to rate the importance of a range of potential priorities for their organisation today, as well as their expected priorities in five years’ time.
Grid capacity expansion is the most important priority today, particularly for respondents in Europe, and those in the transmission or distribution sectors. It is expected to be even more important in five years’ time, with particularly large increases in importance expected from Asia Pacific and North America respondents.
THE BARRIERS TO A FASTER ENERGY TRANSITION
The biggest barriers for power grids are more socio- political than technical. The top barrier to a faster energy transition, according to the survey respondents, is a lack of policy
(or government) support, closely followed by the capacity constraints of existing grid infrastructure. Overcoming the latter is often prevented by the former, as well as the thirdand fourth-ranked barriers, respectively: difficulties in securing permits or licenses, and public objections or resistance.
Socio-political issues are often intensified when power grid projects span international borders. “Then you have agencies on either side concerned about sovereignty,” says John Irving, Senior Consultant at The World Bank.
“Information sharing is often a problem. Generally, power trading, load shifting, and stabilising are technically straightforward but the institutional issues – the grid codes, the market codes, the operational codes – are all fraught with national concerns over a loss of autonomy. The hardest part is just to align technical standards with each other. Synchronisation is often seen as a political issue rather than a direct electrical issue.”
Inadequate supply chain capacity was cited as a top-three barrier to a faster energy transition by 18% of respondents overall.
This was significantly higher (29%) in North America. In the US, there is significant concern about a lack of domestic manufacturing capabilities, a recurring theme across the “13 deep- dive energy supply chain assessments” recently published by the US Department of Energy, which included analysis of
“critical components” such as large power transformers and high-voltage direct current (HDVC) infrastructure.
Concern about the availability of materials will put even greater strain on already strained supply chains and source materials.
Academic modelling of the material requirements for future global electricity infrastructure (consistent with meeting
Paris Agreement targets), shows that the electricity sector will demand roughly twice as much copper, aluminium and steel in 2050, compared to 2015 levels. This will push up the price of copper and drive an urgent need for clearer rules around for decommissioning assets, circularity and recycling.
THE BUREAUCRACY BARRIER
Currently, in most regions, it is far quicker to add renewable energy plants than it is to add new grid infrastructure. Transmission and distribution networks are currently viewed as key bottlenecks in the energy transition.
Energy infrastructure development often goes through multiple regulators. New transmission links, for example, may require an environmental impact assessment from one department, electricity market approval from another, and operational compliance from somewhere else.
Planning permission is likely to come from multiple local governments along the route, and further permits could be needed for interfaces with other systems, such as water, transport, and communications infrastructure. This is part of the reason why it takes so long for new infrastructure to be approved.
Respondents from all regions (88%) believe that reforms to permitting and licensing processes (for electrical power infrastructure) are critical to meeting net zero targets. The majority of respondents (85%) also say that policymakers do not understand the challenges involved in rapidly expanding and upgrading the power grid.
Equally, it is likely that many in the energy industry do not fully understand the challenges involved in regulating fastchanging, critical infrastructure.
Greater collaboration and co-creation can help address these issues in regions where regulators and industry participants are pulling in different directions.
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