Grid Resilience: Challenges, Needs, and Actions for a Sustainable Future

Published on June 21, 2024 by Vinay Panwar

For the last couple of decades, renewable energy has taken centre stage in the energy sector. In most cases, renewable power sources – solar, onshore wind and particularly offshore wind – are located far from the places where the power is consumed. Therefore, to evacuate this renewable power, large investments in the transmission and distribution (T&D) sector become imperative for the overall development of the renewable energy sector. The existing infrastructure, however, in most geographies does not have capacity to add more power produced from these sources.

The need

The current state of the T&D sector cannot be considered robust, as we have seen multiple cases in which renewable plants were delayed or were not running at full capacity, owing to a lack of grid infrastructure or transmission capacity. Some renewable projects were even shelved due to delays in setting up a grid connection. As per a report published by International Energy Agency in October 2023, c.1,500 GW of renewable projects are waiting, as the current grid infrastructure cannot use them.

If we look at the Net Zero Emission (NZE) 2030 scenario, transmission lines will be required to add another 2.5m kilometres (km) over 2022-30, and the distribution network will need to add another 16m km. For 2022-50, transmission lines need to be increased by 9.5m km and the distribution network by 115m km. This growth will require large investments from governments, as well as power companies. According to Bloomberg, global investment in the electricity grid will likely be at least USD21.4tn by 2050 to support NZE targets.

The challenges

These numbers may excite many people; however, growth depends on multiple factors and has its own set of challenges. The sector would need not only the investment but also to be supported by a regulatory framework, which includes policies aimed at expediting the approval process and setting favourable tariffs and other incentives. Furthermore, the supply chain network needs to be robust, as increasing demand can put pressure on the components and equipment market. We will analyse some of the challenges the T&D sector faces, along with various initiatives countries take to boost their T&D networks to meet their NZE targets.

Long lead times – Power projects have always been plagued by long lead times. Average lead time for an overhead transmission line project in the US and Europe is c.10 years, and, in many cases, it is higher. Attaining permits and approvals takes the most time (c.70%). This leads to a substantial increase in the cost of the project, which ultimately might affect the generation project.

Supply chain issues – The ambitious NZE targets have burdened the supply chain for the T&D sector. The sudden surge in new investments will require the supply chain to be strong for essential components – reactors, transformers, line conductors, cables and steel. The US currently has insufficient manufacturing capacity to meet demand for grid transformers and components. Components, such as large power transformers, have a lead time of almost two years. Another example is higher demand for equipment and machineries needed for installation of subsea cables. Currently, there is a limited number of vessels that can carry out the job of laying subsea cables, and the industry needs a greater number of these vessels, as we go more offshore.

Land acquisition and right of way – Certain approvals must be taken, and land needs to be acquired in the areas through which the line passes. Power lines need to be clear of tall trees, buildings and other obstacles that may interfere with line operation and to ensure the safety of the public and environment. In countries such as India, it becomes even more difficult to acquire land, as small parcels of land might be owned by many people. Other sectors, including road construction and natural gas transmission, also face these challenges.

Grid stability – The energy supplied by renewable sources is unstable and fluctuates, thus posing a big challenge for the grid. The production of power from solar or wind sources depends on the weather, as sunlight and wind intensity vary at times. Therefore, relying only on renewable sources would mean having more unutilised capacity of the grid.

Action

To help develop the T&D network, various governments not only have announced significant investments but have also come up with new policies and regulations that should help expedite these projects. Let us have a look at some of the initiatives taken by major economies in the T&D sector aimed at improving the current infrastructure and adding new lines.

United States

The US has faced issues related to project permits and approvals, thus leading to project delays and cost overruns. To overcome these hurdles, initiatives have been taken to expedite the new projects and improve the conditions of the existing infrastructure.

Last year, the Biden administration announced investment of c.USD10.5bn over 5 years. This investment will go towards Grid Resilience and Innovation Partnerships, which is aimed to modernise and expand the US’s grid network.

Additionally, the Action Plan for Offshore Wind Transmission Development in the US Atlantic Region (Action Plan) has been formulated; it aims to efficiently connect the offshore wind projects on the Atlantic Coast to the national electric grid. This plan has been jointly developed by the US Department of Energy and the Department of the Interior’s Bureau of Ocean Energy Management, in consultation with the Federal Energy Regulatory Commission. The Action Plan has time-bound specific targets: to connect 30 GW of offshore wind by 2030 and 85 GW by 2050.

China

China has been leading the development of renewable projects, as well as new high-voltage transmission lines. Between 2014 and 2021, China developed 80x more high-voltage transmission interconnections (compared with the US). It has continued the pace, as the two major state-owned companies – State Grid Corporation and China Southern Power Grid – will together invest c.CNY2.9tn (more than USD400bn) during the 14^th 5-year plan (2021-25) to further develop transmission grids. China has been deploying ultra-high-voltage technology on a large scale. In 2019, it launched the world’s first 1,100 kV ultra-high-voltage direct-current transmission network.

Europe

In Europe, electricity consumption is expected to increase 60% by 2030. The solar and wind power capacity in Europe is expected to grow 600 GW (to 1,000 GW in 2030 from 400 GW in 2022). The European Network of Transmission System Operators for Electricity’s Ten-Year Network Development Plan (TYNDP) shows that cross-border transmission infrastructure should double by 2030. This increase will likely require an investment of EUR584bn, which will also include upgrading the existing distribution infrastructure.

The European Commission has proposed an action plan to facilitate grid projects. The action plan includes various measures to address bottlenecks in grid reinforcement and expansion. The objective is to promote new investment, as well as ensure better use of the existing grid. The major steps planned to accelerate the pace of grid development include introducing a supportive future-proof regulatory framework and ensuring faster, leaner permitting processes. Another focus area is to improve access to financing and strengthen supply chains.

The action plan will most likely help accelerate cross-border electricity transmission projects, which would ultimately help integrate new renewable projects.

India

In January 2024, the Government of India introduced Electricity (Amendment) Rules, 2024, which allows large industrial users to set up and operate their own power transmission lines and grid connectivity without requiring a licence.

In August 2023, the Ministry of Power published a framework for energy storage systems (ESS) to promote the adoption of energy storage. The variability with renewable energy sources can be addressed with ESS, which can improve grid stability.

In December 2022, India unveiled plans to invest USD29.6bn by 2030 to set up a transmission network to connect renewable projects. This includes building high-voltage transmission lines and laying subsea cables to connect offshore wind.

In October 2021, India launched the PM GatiShakti National Master Plan (NMP), focused on developing and speeding up infrastructure projects in the country. The plan is expected to play a key role in planning, tendering, implementing and approving stages of power transmission projects. NMP has a digital platform, which provides a one-click comprehensive view of power transmission projects. It also provides single-window clearance for transmission projects.

Additionally, the policy changes and amendments to the Standard Bidding Guidelines have enabled more private sector participation. Recent bids have seen c.8-10 active bidders. Even the project completion timelines have been drastically reduced to an average of 18-21 months from 30-36 months.

Other countries

In the UK, the government has made changes to Ofgem regulations, including expediting the regulatory approval process for transmission projects worth GBP20bn identified in the Holistic Network Design, a plan for the electricity network to support up to 50 GW of offshore wind by 2030.

In Latin America, Brazil is expected to invest USD20bn in the transmission sector during the 10-year period ending 2029. Out of this amount, USD14bn will go into transmission lines and USD6bn into substations.

In October 2022, Australia launched the Rewiring the Nation initiative to modernise the existing power system and add new infrastructure. The programme entailed an investment of AUD20bn to achieve emissions reduction targets of 43% by 2030 and NZE by 2050.

Conclusion

Though the targets that we have set for NZE seem to be quite ambitious, recent initiatives by various countries raise people’s hopes of a green and clean environment for the next generations. The long journey has just begun. The T&D sector will have to maintain the same speed of growth as that of generation projects; that is the only way we can have renewable energy reaching more homes. With the recent actions and initiatives announced by corporates and governments, the future looks bright for all stakeholders. T&D companies will have their projects expedited and capacities better managed, the generation companies will likely invest more in renewable projects, and the equipment and component suppliers and other service providers will experience tremendous growth opportunities.

Sources

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About the Author

Vinay Panwar

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Vinay has more than 14 years of experience in strategic research, consulting, and procurement. His area of expertise is industry analysis, competitive benchmarking, capital projects benchmarking, market entry strategies, contractor performance analysis and has worked across sectors like Oil & Gas, Power & Renewables, Petrochemicals, Infrastructure, and allied sectors.

At Acuity Knowledge Partners, he has been a core member of the consulting practice for more than 9 years and is currently engaged in helping a leading consulting client on strategic research projects. He holds an MBA degree from Pandit Deendayal Energy University, Gujarat.