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Wholesale Banking

More than just a generation game: Why renewables need better distribution and transmission

A man working on the electrical grid

With renewable energy and electrification alone, we can make 75% of the energy-related CO2 emissions reductions needed to meet climate goals, according to the UN’s International Renewable Energy Agency, IRENA (1).  So what is stopping us from integrating the growing share of renewable energy generation and scaling up electrification?

Infrastructure investment. We have to invest in renewable energy generation, of course, but we also need to look at what happens after energy is generated. The International Energy Agency (IEA) estimates that in 2018, global losses from transmission and distribution networks required additional power generation that caused 1 gigaton of extra CO2 emissions (2). That is the equivalent of almost half the total CO2 emissions produced by power generation in the US that year (3).

So we need improved grid transmission to integrate the growing share of renewables and distributed energy systems that can support electrification for commercial and residential needs, as well as the electrification of transport.

It starts with the policymakers

Much of the energy transition depends on continued public and private sector investment and partnerships. The European Union’s Green Deal, for instance, which seeks to attract €1 trillion in investments to fund the transition to a green economy (4), is an opportunity to put in place the infrastructure necessary for the energy transition.

Strong policy guidance will be important here to safeguard investments. Renewable energy technology may be approaching cost parity, but the outbreak of the pandemic in the first half of 2020 has threatened a backward step due to economic uncertainty, low electricity demand during the pandemic and depressed wholesale electricity prices particularly in the second quarter of 2020.

Hanif Mashal, CTO and VP of Engineering at Danish wind turbine rotor blade manufacturer LM Wind Power, considers this to be a risk. “We believe that the public sector – especially governments that have funds earmarked to combat climate change – may redirect funds from long-term projects [such as wind power] to other projects to meet their social goals, or reduce unemployment, and support other sectors that are more impacted by Covid-19,” he says.

Greater certainty about policy commitments can spark private sector and investor confidence in renewable generation capacity – next, governments need to commit to improving and expanding transmission and developing storage and system-level integration.

“Putting in adequate transmission and storage as backbone is a prerequisite for continued commercial expansion of renewables,” says Diederik van den Berg, Global Lead [Energy] - Renewables & Power at ING. “But this isn't necessarily going to be invested in by market participants without long-term transparent EU and member-state-level regulatory support. If the EU Green Deal is serious, and if its plans for massive infrastructure investment in energy systems integrity and digitalisation do come about, then it will iron out some of the issues. But the challenge is to keep transmission infrastructure accessible and affordable for society as grids are traditionally not set up to deal with intermittency of renewable energy generation.”

A man installing solar panel

Let it flow: Electrification in cities and beyond

Investment that improves Europe’s grid and enhances cross-border flows between countries can help to bring clean energy to areas that are still reliant on fossil fuels.

For Mashal, energy infrastructure upgrades will enable more renewables to penetrate the power grid. “Investing in inter-city transmission and distribution infrastructure,” he says, “will connect urban consumption with major transmission lines and to the renewables: offshore and onshore wind, solar, storage. In addition, it will create opportunities for hydrogen production using renewable energy.”

And cities themselves also need upgrades and infrastructure investments – particularly to set the stage in urban areas for the electrification of transport. For cities, electrification of buildings, transport and heating systems is an increasing focus – a crucial building block of the decarbonised economy.

Another of those building blocks is decentralisation. Carl Bayliss, VP Mobility & Home Energy at Centrica in the UK, says that distributed generation is taking off in urban areas as businesses seek greater control over their electricity sourcing and the cost reductions they can gain from efficiency savings.

“A hundred years ago, energy was generated closer to the point of supply – often within the factories itself,” he says. “Then everything was centralised, with lots of fossil fuels being burned in huge power stations, and then transmitted over hundreds of miles of cables. Over the past couple of years, we've seen a huge shift back to decentralisation.”

Virtual power plants can now manage networks of decentralised generation assets such as solar parks, wind power or combined heat and power (CHP) generation.

At the same time emerging technologies – electrical vehicles, storage and the Internet of Things – both require and enable smarter electricity grid management.

“We already have the technology, the scientific understanding, and the financial means and human resourcefulness to tackle climate change,” says Hanif Mashal. “The private sector is ready to flatten the emissions curve – what we need to succeed is leadership and global political will.”

As Mashal suggests, it is leadership from the top that can drive the transmission and distribution improvements – a digitalised, decentralised infrastructure – that makes the energy transition possible. Without it, we risk having all the renewable energy we need, but with nowhere for it to go.