4th Dec 2023

Power grid spending needs to double to €600bn, IEA warns

  • IEA's executive director Fatih Birol: 'Plan early and do it right'
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Between now and 2040, the world needs to build or refurbish 80m km of power grid to ensure renewable power supplies meet climate targets, the International Energy Agency reported on Tuesday (17 October) — the equivalent of the entire existing global grid.

"One trend is very clear: the world is going into the direction of clean energy, and it is going very fast," IEA's executive director Fatih Birol said in a press conference. "The days that coal is king are over. Now solar is king."

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  • 'A lack of grid capacity is already slowing down the transition to clean energy' warned the study's main author, Pablo Hevia-Koch (Photo: Thomas Despeyroux)

"But at the centre of this clean energy transition, there is a major problem: the inadequacy of our grids," he added.

But while the clean transition is snowballing (in 2022, 80 percent of all new power plant additions were solar and wind project), boosted by clean energy investments that have doubled over the past decade, grid investments have remained flat at around €300bn a year.

Power is no longer primarily used to power electric appliances in homes. Major parts of the energy system are being electrified. "New end users are joining as consumers. Electric vehicles are replacing oil, and heat pumps are replacing natural gas," added Birol.

Distribution systems must also be capable of transporting electricity from regions with ample sun and wind to locations where it may be lacking on any given day.

According to the IEA, this means that grid investments need to double to €600bn a year, otherwise a bottleneck will form, slowing down renewable expansion.

"A lack of grid capacity is already slowing down the transition to clean energy," warned the study's main author, Pablo Hevia-Koch.

In 2022, the equivalent of 1,500 gigawatts of solar and wind power was waiting to be connected to the grid — five times what is added annually.

And this data only comprises the EU, the US and Japan, which account for about 50 percent of global renewable energy development. The actual figure might be "much larger."

Although costs are high, the costs of doing nothing are "much higher", Havier-Koch also said.

If the current low rate of grid expansion is maintained, fossil-fuel bills for importing countries like most EU member states would increase by $500bn [€473bn] from 2031 to 2050.

The cost of outages, which already clock in at €100bn a year, would also "expand over time," the report noted, although no exact figure was mentioned.

In a previous study, the IEA calculated the cumulative fuel savings to exceed €11 trillion if states reached net zero by 2050.

Plan early, and do it right

Although the lack of grid capacity has been a growing concern for policymakers, the IEA study's overview is "the first of its kind," said Birol, who urged governments to start planning immediately.

Planning a grid in an advanced economy often takes more than a decade, meaning that the "decision window" for planning the power system 2035 "is already open", Brent Wanner, the head of IEA's power sector unit, said.

These timelines cover the investment decision only. Wanner emphasised that "the broader planning process" also requires policymakers to ensure that grid builders have enough materials by the time the building starts.

Copper demand, for example, will double by the 2030s. The same goes for hair-thin electrical steel used to transport energy.

"Plan early and do it right," said Birol. "That is the most important recommendation from this study."

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