The global renewable energy sector is experiencing unprecedented growth, with substantial investments being made worldwide.
However, insufficient grid capacity to support the surge in clean energy projects threatens to undermine these efforts.
According to the International Energy Agency (IEA), the world added around 560 gigawatts of renewable power last year, marking a 64% increase from 2022.
This rapid expansion reflects the global commitment to reducing reliance on fossil fuels. However, many renewable energy projects are stalling due to grid access challenges, particularly in areas without pre-existing power plants.
In regions like the United States and Europe, renewable energy installations with the potential to generate electricity equivalent to the output of 480 nuclear reactors remain disconnected from power transmission networks.
Similarly, across four major European countries, solar and wind projects waiting for grid connections have amassed a combined capacity of over 860 gigawatts, according to BloombergNEF.
A critical issue is that the expansion of grid infrastructure is failing to keep pace with the rapid deployment of renewable energy.
While global investment in clean energy plants reached $670 billion in 2023—double the figure from 2015—investment in grid infrastructure has stagnated.
The IEA reports that grid investment has plateaued at approximately $330 billion, far below what is needed to accommodate new energy generation capacity.
In Asia, grid limitations have also hampered progress. In South Korea, for instance, US-based asset manager BlackRock’s plan to construct an offshore wind farm was rejected due to insufficient grid capacity.
Unlike renewable energy projects, which can be built relatively quickly, large-scale grid infrastructure developments often take over a decade to complete.
Complicated regulatory approval processes, coupled with rising raw material costs, have deterred investment in grid expansion, leaving many projects in limbo.
The potential impact of inadequate grid capacity on the global energy transition is very crucial. The IEA forecasts that renewable energy could account for 60% of the global energy mix by 2050, in line with decarbonisation targets.
However, if grid capacity issues are not resolved, this figure could drop to 40%, forcing countries to continue relying on fossil fuels to meet energy demand.
In response to these challenges, some governments are taking action. The US government announced a $2.2 billion initiative in August aimed at upgrading its power grids to accommodate the growing influx of renewable energy.
Meanwhile, Japan has pledged up to $49 billion in transmission network investments by 2050 as part of its broader efforts to attract private investment and meet decarbonisation goals.
Europe is particularly feeling the pressure as it reduces dependence on Russian gas and accelerates its decarbonisation efforts following the war in Ukraine. As countries across the continent ramp up renewable energy production, grid bottlenecks have become a critical challenge in delivering clean energy to consumers.
The need for efficient and reliable grid infrastructure is becoming ever more urgent as governments worldwide intensify their efforts to combat climate change. Without addressing the grid capacity shortfall, the renewable energy revolution could be delayed, jeopardising global decarbonisation targets and prolonging dependence on fossil fuels.
At the COP28 climate summit in Dubai, nearly 200 countries made pledges to help limit global warming to 1.5°C, aligning with the Paris Agreement.
Key global goals for 2030 were established, including tripling renewable power capacity, doubling energy efficiency improvements, reducing methane emissions, and transitioning away from fossil fuels. These targets are seen as critical steps in tackling climate change.
Countries are now focusing on implementation as they prepare to submit updated Nationally Determined Contributions (NDCs) under the Paris Agreement in 2024.
The revised climate action plans will include new goals for 2030 and 2035, providing an opportunity to align with the global pledges made at COP28.
A recent analysis by IEA indicates that tripling global renewable power capacity by 2030 is ambitious but achievable, thanks to strong growth in the sector.
However, only 14 out of 194 previously submitted NDCs explicitly include renewable capacity targets, covering just 12% of the required 11,000 GW needed to meet the tripling pledge.
China accounts for over 90% of the renewable capacity mentioned in these NDCs.
Moving forward, IEA urges countries to revise their renewable energy ambitions and prioritise policies that address gaps in both ambition and implementation to meet climate goals.
