The grid needs a $20 trillion upgrade to support the energy transition

Yves here. One hates to point out the obvious: the gap between the amount needed to overhaul electrical systems worldwide, versus plans and funding to date, translates to “na ga happen” at least in the time frame needed. Yet various initiatives, assuming network capability, in the classic economist’s “hire a can opener” mode, are proceeding apace.

So the implication seems to be that green energy implementation will be patchy and insufficient. But the other shoe, that of the need for radical conservation, has yet to fall.

By Irina Slav, writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at Oil price

  • In 2020, BloombergNEF estimated the cost of a network overhaul at $14 trillion over the thirty years between 2020 and 2050.
  • In 2023, the cost to upgrade the network rose to $21 trillion.
  • Upgrading the global power grid comes with a unique set of challenges including local opposition, skills shortages and a funding issue.

For the energy transition to happen, the world needs massive grid overhauls. This message was overlooked for years as wind and sun stole the limelight, but now it’s back on the agenda. Because no transition from baseload, distributable power generation to distributed and intermittent generation is possible without a massive grid overhaul.

In 2020, BloombergNEF valued the cost of that overhaul to $14 trillion over the thirty years between 2020 and 2050. That’s what it would cost to build millions of miles of new transmission lines and associated infrastructure to meet the expected surge in wind and solar energy.

That was in 2020. Now, the price tag for the network overhaul has risen to an estimated $21 trillion, once again, according to BloombergNEF. Because, to reach net zero by 2050, the world would need to double the length of operational transmission lines to 152 million km. And that basically means that, as things stand right now, we have little chance of reaching net zero by 2050.

For starters, the money for these massive investments in network adaptation has to come from somewhere. It can’t all come from government subsidies: building new transmission lines costs billions. Right now, there are three new US underground electricity transmission projects with a total price tag of $13 billion.

Then there is local opposition to such projects, which makes getting off the ground even more difficult. People don’t like transmission lines running over their backyards, that’s all. They also don’t like that forests have to be cleared for the new line. It’s NIMBY-ism at its best, and there’s very little anyone can do about it except hope it doesn’t progress to BANANA status: build absolutely nothing next to nothing.

But suppose the money can be found by environmentally concerned investors and governments, and suppose NIMBY can be transacted, perhaps financially. There is a bigger problem than either of these and both together. A lack of skills.

There are not enough men of the line: the people who build and maintain transmission lines. In places like Australia, there aren’t enough people to build the wind and solar farms that would require a net zero transition. And the rate at which people are acquiring these essential transition skills lags far behind transition plans, such as the FT reported earlier this week.

Each of these challenges alone can derail the transition because it would derail the vital network upgrade. Taken together, they make the transition, at least as currently planned in the West, nearly impossible to achieve.

But they are not the most immediate challenges, not to the transition but to our usual way of life. The most immediate challenge is power outages. This is because, despite the need to upgrade the grid and adjust to the increasing amounts of wind and solar energy fed into it, the balance between baseload and intermittent generation has shifted in a way that makes the grid unstable. .

Simply put, reliable 24/7 power generation capacity is being retired faster than the grid is regulated for intermittent wind and solar, and faster than building new wind generation capacity and solar. To say this isn’t exactly optimal for a healthy feeder is putting it mildly.

Compared to these challenges, enabling is a small potato. The regulation can be changed if there is enough momentum driving that change. However, small or not, authorization procedures are in the list of things preventing the energy transition in its most important part: the grid.

According to an Apr relationship from Lawrence Berkeley National Laboratory, there is 1,300 GW of new wind, solar and storage capacity waiting to be connected to the grid. However, most of these won’t be built at all, because getting into the interconnect queue is just the beginning of a process that takes years and doesn’t always have a happy ending.

According to the report, “projects must also have agreements with landowners and communities, energy buyers, equipment suppliers and lenders, and may face transmission upgrade requirements.”

On the surface, the energy transition looks so simple. We just build lots of wind turbines and an array of lots of solar panels, put in a battery here and there, and switch from gas heaters to heat pumps. We electrify everything we can electrify and discard the rest.

Beneath the surface, things look very different indeed. There aren’t enough raw materials to build all that wind and solar capacity and batteries. There are not enough people to physically complete the buildout. There aren’t enough people to build the many new transmission lines. The money for all these things still needs to be secured.

Until all of these issues are permanently resolved, net zero will remain a fantasy, and no amount of investor activism and pressure on companies to report their emissions would change that.

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