For the past four or five years at least, there has been a growing number of voices calling for much-needed investment in grid networks practically everywhere. While investment in renewable energy generation has increased impressively – it has roughly tripled in the past decade, according to BloombergNEF – it won’t do much for the energy transition if it is unable to connect to the grid.
This past year, however, there seems to be some progress made with regards to giving the grid the attention it deserves. The International Energy Agency delivered some good news earlier this month in the latest edition of its annual World Energy Investment report, stating that spending on grids is set to reach $400 billion in 2024, after being stuck at $300 billion annually between 2015 and 2021. “The increase is largely due to new policy initiatives,” it noted, in various parts of the world.
One of those is the EU’s Action Plan for Grids, issued last November, which the Commission described as “a set of easy-to-implement actions to make sure a difference is made in time for the 2030 climate and energy objectives”. And those objectives are ambitious: increasing wind and solar power generation capacity to at least 1,000GW by 2030, including a build-out of offshore renewables up to 317GW by 2050. As for cross-border transmission capacity, 23GW needs to be incorporated by 2025 and an additional 64GW is needed by 2030. According to the Commission’s estimates, €584 billion needs to be invested in the electricity grid – roughly two-thirds of that at the distribution level – within this decade.
To achieve these objectives, the EU aims to accelerate the implementation of 85 projects of common interest, improve access to finance by increasing visibility on EU funding programmes and accelerate permitting.
But will any of these measures help reduce the backlog of renewables projects waiting to be connected? The answer is no.
“The long queues are the single biggest issue that we face right now,” said Rosheen McGuckian, CEO of renewables investor and asset manager NTR. How big of an issue? According to BloombergNEF, roughly 500GW of wind and solar projects were waiting to be connected in the UK, Spain, Italy and France at the end of 2022.
And a major contributor to that is a shortage of skilled talent at the TSOs and particularly the DSOs, according to McGuckian. This leads to missed deadlines and delays.
Another contributor is the supply chain, but thankfully, the Action Plan calls for the standardisation of technical specs across the region so that manufacturers can plan and produce the equipment and parts needed at scale.
But perhaps the biggest shortcoming of the EU’s initiative is that it’s not binding.
“The best way to make things happen is either through legislation, financing it or imposing penalties for failure to deliver,” said McGuckian.
The Action Plan is not legislation, it’s more of a proposal encouraging or asking the various stakeholders to compare notes and share knowledge, but there’s no obligation to take action.
As for financing, the only money being offered through the Connecting Europe facility is going towards the 85 projects of common interest. It’s supposed to be €34 billion, “but when you look under the bonnet, only €6 billion of that is earmarked for energy projects”, McGuckian noted.
And of course, there are no penalties for TSOs and DSOs who fail to meet their connection timelines.
In short, we see the EU plan as being full of good intentions. But, as we all know, good intentions don’t always lead to a good place.