The bottlenecks to faster renewables development

TL;DR

• The journey to carbon neutrality necessitates a profound transformation of our energy systems – central to this transformation is electrification. 

• To reach net zero, we must immediately set about electrifying sectors which have been historically reliant on fossil fuels, such as transportation, heating, and many industrial processes. 

• There are many technical challenges to this, including the need to expand and ‘smarten’ transmission grids.  

• This is easier said than done. Upgrading grids requires huge amounts of political, social and financial capital, as well as solutions to technological obstacles related to geographic location of renewable power sources and the intermittency of the supply they produce.   

• According to the IEA, expenditure on grids globally needs to double to $600 billion a year until at least 2030 to get back on track. In the UK, the National Grid has put forward a £58 billion transmission network proposal.

• Governments face a daunting challenge of balancing the books and doing what is right for the long term.

The detail

Although opinions may vary as to how and when we get there, the ambition to reach a net zero society underpinned by sustainable living and a circular economy is one that has broad global support across public and private spheres alike. 

Many countries have pledged to achieve net zero emissions by mid-century in pursuit of this sustainable future – a milestone that it is viewed by many in the scientific community as critical to keeping global warming to within limits set out in landmark agreements such as the Paris Accord. In fact, there is strong support of the view that net zero by 2050 is insufficient in stemming the tide of climate change.  

Different perspectives aside, there is absolutely no doubt that the journey to carbon neutrality necessitates a profound transformation of our energy systems, with a paramount emphasis on decarbonisation. Central to this transformation is the electrification of numerous industries, driving a surge in demand for clean energy sources, particularly renewables. However, as the urgency to transition intensifies, the renewable energy sector faces formidable challenges that pose potential bottlenecks, impeding the pace of development needed to meet net zero aspirations. 

Electrification, electrification, electrification   

Before we go into that, it is important to understand where electrification is most needed. 

Specifically, we need to shine a spotlight on those sectors which have been historically reliant on fossil fuels, such as transportation, heating, and several industrial processes.  

Looking at the first of these, transportation stands on the cusp of a revolution as electric vehicles (EVs) gain prominence and seek to abate the emissions produced by one of the world’s most polluting sectors. The electrification of transport not only necessitates an expansion of renewable energy capacity to power these vehicles, but also demands sizeable advances in battery technology, charging infrastructure and grid integration – these are all critical to supporting the widespread adoption of EVs.  

In a similar fashion, the electrification of heating systems in buildings and homes is emerging as a linchpin in the transition to a low-carbon future. Heating forms a large proportion of what is known as the operational carbon associated with buildings – in other words, the emissions associated with running them after they have been built. By replacing traditional fossil fuel-based heating with electric alternatives such as heat pumps, the heating sector can significantly reduce its carbon footprint. However, the transition faces challenges related to the retrofitting of existing infrastructure, the high upfront costs of new technologies, and the need for grid upgrades to accommodate increased electricity demand during peak periods (more on grids a bit later).  

Industrial processes also account for a significant share of global emissions, with hard to abate sectors including cement, steel and petrochemicals, among others. These are ripe for electrification through the deployment of renewable energy-powered technologies such as electric arc furnaces and hydrogen electrolysers.  

Of course, this is far easier said than done. Indeed, these industries are often operating amid complex and diverse energy requirements which present unique challenges, including technological barriers, economic considerations and the need for regulatory incentives to drive innovation and adoption. 

We need to talk about the grid 

The case for electrification, and therefore renewables to power it sustainably, is undeniable.  

However, despite the palpable momentum behind renewables, the path to widespread adoption is fraught with obstacles. From technological limitations and infrastructural constraints to regulatory hurdles and financial barriers, these bottlenecks pose formidable challenges that must be surmounted to realise the full potential of renewable energy. 

Technological limitations are particularly well documented, and there are too many to cover properly here in a single salvo. Instead, I want to focus on the lesser talked about (and less glamorous) issue of grid infrastructure.  

A key issue related to grid suitability for renewables is that they were originally designed for large, undistributed single assets. To accommodate electricity generated by renewable energy sources in disparate locations, extensive upgrades and expansions to hard-to-reach areas are required.  

Indeed, renewable energy sources like wind and solar farms are often located in remote or geographically constrained terrains – a good distance away from population centres where electricity demand is high. This naturally creates a need for robust transmission networks which are capable of transporting electricity efficiently over long distances. 

Another challenge facing grid operators is the intermittent nature of some cleaner forms of power generation, in particular solar and wind. This variability of supply can strain the stability of the grid and requires investment in smart grid management solutions and processes, as well as energy storage and demand-response systems to help balance supply and demand in real time.  

Huge investment is needed 

Solutions to these grid-related challenges, and other technical bottlenecks to faster renewables development, do exist and are maturing all the time.  

However, making the necessary adjustments to infrastructure is an extremely costly undertaking that requires sustained investment and commitment to the cause.  

Specifically, the financing of transmission infrastructure projects can be a significant barrier, especially when these projects are located in regions where the cost of grid expansion outweighs the immediate economic benefits. This issue is exacerbated by a lack of clear cost-recovery mechanisms and financial incentives for grid investments, making it challenging for utilities companies and developers to justify such large upfront capital expenditures.  

At a global level, the amount of financing needed to make electricity grids is mind-blowing. 

According to the International Energy Agency (IEA), investment in electricity grids needs to average around $600 billion a year until the end of this decade to get us back on track with the net zero emissions trajectory. To put it into perspective, this is double the current annual rate of investment which sits at approximately $300 billion.  

In the UK, the National Grid has put forward proposals for an investment of £58 billion to expand capacity and accommodate huge increases in demand in line with plans to decarbonise the power sector by 2035. At the moment, it is difficult to tell whether that will be enough.  

An important part of getting the UK ‘grid-ready’ for net zero centres around building out new networks of transmission lines, chiefly pylons.  

Much of the heavy lifting, National Grid says, will be carried out by a backbone of pylons transporting electricity from new offshore windfarms in the Northeast of Scotland to Merseyside in the Northwest of England. Meanwhile, other onshore pylon routes have been earmarked in Wales, the Midlands and from Norfolk into London and the Southeast.  

Overhead cables are financially more viable and able to transport greater volumes of electricity – however, these plans have given rise to intense resistance from local communities who are worried about new pylons being built near their homes.  

This feeds into challenges related to planning reform, as regulatory systems themselves also present a bottleneck to developments breaking ground. Permitting processes for new transmission lines can be lengthy and complex, often involving a web of stakeholders and regulatory agencies at the local, regional and national levels. And delays in approvals can impede grid expansion efforts and hinder the timely integration of renewable energy projects into the grid. 

Is political support at a crossroads?   

As well as ticking important regulatory boxes and getting buy-in from local communities, grid-related and other renewable energy infrastructure projects need to be backed by the government. 

At a local and national level, politicians need to be committed to doing what is needed to reach net zero by 2050, looking beyond fixed parliamentary terms that can often lead to temporary plasters being put in place instead of long-term solutions.  

A few weeks ago, I looked in detail at the UK Prime Minister’s track record on net zero and questioned whether he is truly invested in the journey. As we head towards a general election, similar questions are now being asked of Kier Starmer and the Labour Party about its pledges around energy transition and tackling climate change. In recent months, the party has rowed back on its commitment to invest £28 billion a year in green projects during its first term in government, a move which has raised eyebrows among renewable sector stakeholders.  

It must be said, however, that Politicians face an unenviable reality. In the current economic climate, it is very difficult to sell huge spending commitments on net zero to the voting public, many of whom are struggling to make ends meet as the cost-of-living crisis stubbornly holds firm. The economy is flatlining, creating little headroom to announce big spending on anything beyond the essential public services that society relies on. Rightly or wrongly, committing tens of billions to net zero projects is often viewed as a trade-off that we cannot afford.  

It may even take a shifting of the government’s self-imposed budgeting rules around debt to free up the capital needed. But this is far from straightforward, as Liz Truss discovered when she tried to shift the dial during her short period as Prime Minister.  

We’ve reached a point where it feels like something must give. The world stands at a pivotal juncture in the fight against climate change, and the urgency to address these bottlenecks has never been more pressing. Concerted action and collective resolve are needed in abundance – only then can we unleash the transformative power of renewables and pave the way towards a sustainable and resilient future for generations to come. 

— Lew 👋

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