A successful transition to renewable-dominated Energy systems requires high-capacity intelligent Electricity grids. Building them fast enough is an enormous challenge.

The aging electricity grids of today need unprecedented multibillion-dollar investments to make them digitalized, smarter and flexible enough to meet energy transition demands: higher data exchange, maximized efficiency and the prevention of blackouts or unsynchronized generation. 

There will be no successful Energiewende, a sustainable decarbonization and overall green-energy revolution of the future, without the backbone of a modernized electricity grid. 

The mammoth task

The challenges include building large, cross-border grid networks and smaller, regional and local distribution grids. It is a colossal task: some 80 million kilometers of new lines – more than the length of the existing global electricity delivery system – need to be in place by 2050 to meet the global climate targets.

Guaranteeing a stable electricity supply is more important for the functioning of critical infrastructure. It combines a growing network of transmission and distribution cables, substations, transformers and 5G technology components. As intermittent renewable energy sources proliferate, the electrification of the transport sector (e-mobility) gains momentum and heat pumps and cooling systems in the construction sector become ubiquitous, the world’s need for capable, interconnected electricity networks – green, reliable, flexible and intelligent – becomes ever more pressing.

The blind spot

While European politicians and lobbyists each year celebrate doing the cheap and easy part – expanding clean energy generation – little attention is paid to the modernization and digitization of aging electricity grids that make clean energy useable. As a result, only a fraction of the newly generated “green” electricity reaches industrial and private consumers. 

Germany’s northern federal state Schleswig-Holstein, for example, reportedly lost 380 million euros on the electricity it could not sell to other German states or neighboring countries in 2021 due to the lack of adequate power grids. According to estimates, some other countries forfeit up to 6 percent of their gross domestic product (GDP) annually due to unreliable power systems.

Even the large energy infrastructure projects are running behind their original schedules.

In Europe, attention has been focused on new transnational grids (such as between Norway and Germany or Norway and the United Kingdom) and long-distance national grid projects, like Germany’s SuedOstLink underground cable, to transmit up to 2,000 megawatts of emission-free electricity from offshore wind power farms in the north to Bavaria and Baden-Wuerttemberg in the south. However, in the absence of simultaneous investment in regional and local distribution grids, the decarbonization drive will falter. Those local components will make or break the energy transition. 

The International Energy Agency has warned since 2021 that global grid spending is insufficient and needs to more than double from $330 billion per year to $750 billion by 2030, with 75 percent of the outlays for local distribution infrastructure, to guarantee the networks’ stability and controllability. Even the large energy infrastructure projects are running behind their original schedules. They also suffer from significant cost overruns caused by the lengthy bureaucratic permitting processes, local opposition (“not in my backyard” or NIMBYism) and the use of underground cables. That has resulted in high losses of generated electricity, high consumer prices, increasing problems of load inflexibility and insufficient reserve capacity. 

Expensive and time-consuming modernization

Germany’s Energiewende shows that the expansion of renewable energy sources beyond 20 percent of the electricity mix requires an overall system reform and massive infrastructure investment. The new smart grids, storage systems and traditional power plants kept online as backups of intermittent renewable energy sources all cost money. The fast-declining costs of clean energy generation and storage systems invoke a vision of cheaper energy bills soon. The crushing cost of modernizing the entire energy system has been overlooked or heavily underestimated. 

The unprecedented demands of electrification are a challenge not only for Europe, but globally. 

The decentralization of power grids and the diversification of power bases have also radically raised the bar on adequate oversight and network transparency. Reportedly, because of outdated grid monitoring systems, many power networks are running today at 20 percent below their potential capacity. 

Electricity grids in Europe

About 40 percent of Europe’s 11 million kilometers of electric power distribution lines are more than 40 years old. As a result, the increased amount of electricity generated annually cannot be fully transmitted to consumers. Grid investment on the continent was stagnant in 2015-2020 at about $50 billion per year. New grids have proven complicated to build, costly, and require careful planning by various stakeholders across the entire value chain, including telecommunication companies with 5G technology. Lead times have often been eight to 10 years for a new or upgraded grid connection. 

By 2030, Europe will have up to 60 million heat pumps, 65-70 million electric vehicles and over 600 gigawatts of additional generation capacity from renewable energy sources. It is estimated that by 2050, the share of electricity in the European Union’s energy mix will at least double. Some 70 percent of that overall capacity will be directly connected to distribution grids. 

Annual investments in Europe’s aging electricity grids from now to 2050 need to be 84 percent higher than they were in 2021.

At present, however, the operators of distribution grids must cope with limited capacity, complicated and overly long permitting processes and bureaucratic inertia. It can take up to 10 years in European countries to secure permits for grid reinforcements. Therefore, meeting the challenge will require nothing less than a revolution in management culture and the modus operandi of politicians, regulators and legislators. 

In January 2023, Germany’s Federal Network Agency warned that local distribution grids were in danger of becoming a bottleneck in the energy transition. To avoid distribution grid collapses, the agency prepared a plan to temporarily ration power supplies to heat pumps and electric vehicle (EV) charging stations. Charging times could reportedly be limited to just three hours for electric cars – allowing most EVs to cover a distance of about 50 kilometers. 

According to some estimates, the expansion and modernization of the German grid alone would cost more than 100 billion euros. A European-wide electricity grid interconnecting 520 million end consumers in 32 countries demands more than 584 billion euros in investments per year between 2020 and 2030 to meet the green targets.

Some 170 billion euros will be needed only for the digitization of the electricity sector and an automated grid management system with many new interconnection points and data-driven technologies for making the grid “smarter.” Annual investments in Europe’s aging electricity grids – historically often designed around large, centralized power plants – from now to 2050 need to be 84 percent higher than they were in 2021. 

As of today, many European countries are still not ready to have 70 percent of their interconnection capacity available for trade with neighboring countries. But there are exceptions. The Dutch-German power grids are essentially interlinked and include offshore renewable energy source connections. The Scandinavian, North Sea and Baltic countries are also expanding offshore renewable energy generation and hydro connector projects with mainland European countries. 

In May 2021, the German chancellor and prime minister of Norway opened with great fanfare the 1.8 billion-euro-NordLink, a 634 kilometer-long underwater cable with a capacity of 1,400 megawatts linking the two countries. The connection allows Norway to export Norwegian hydroelectricity to Germany and Germany to sell excess wind power to Norway.

In 2021, the European Commission approved adding 67 projects in electricity transmission and storage to its list of energy projects of common interest. They will increase the number of intelligent grid projects to improve the efficiency of networks, cross-border data coordination and grid management. That the world’s three largest cable manufacturers are European companies is expected to help the projects. 

Electricity grids in the United States

In recent years, hurricanes and other extreme weather events have repeatedly shaken the stability and resilience of the U.S. electricity grid. Hurricane Ida, for instance, left more than 1 million U.S. customers without power in 2021 and caused more than $75 billion in damage. 

Before Ida, the catastrophic blackout in Texas in the winter of 2021 put into doubt the resilience of critical infrastructure in the context of climate change. It also raised questions regarding the role of markets, the dilemmas of stable fuel supplies and the intermittent nature of renewable energy sources. Chronic underinvestment in the national grid infrastructure costs the U.S. economy up to $70 billion annually. Sustained grid outages increased from some 20 in 2000 to more than 180 in 2020. Grid connection requests grew by 40 percent last year. 

The U.S. electricity grids are, like the European ones, 40 years old on average, with 70 percent of transmission lines more than 25 years old. Above 74 percent of new electricity generation capacity was from renewable energy sources in 2022. One year later, 82 percent of planned utility-scale generation capacity additions in the U.S. are from renewables. However, investment in new technologies – such as Volt/VAR Control (IVVC) to enhance the ability of utilities to actively control power flows, decrease losses, and reduce peak loads – remains insufficient. As in Europe, the planning and permitting processes for new transmission grids are outdated and highly inefficient. With U.S. President Joe Biden’s Inflation Reduction Act and the Building a Better Grid Initiative, an additional $20 billion in funding to accelerate the modernization of the U.S. grid networks has been made available. 

Electricity grids in China, India and Southeast Asia

In China, annual grid investment expenditures fell between 2019 and 2021 but shot up by 16 percent to almost $83 billion in 2022. Since then, the country’s two-area synchronous grid networks have been interlinked via high-voltage distribution system connections. The modernization drive began in 2011, but like in Europe and the U.S., the power system faces increasing problems with rising frequency in the number of outages, shortages and inefficiencies.

In Southeast Asia, Australia and Singapore have already agreed to build a 3,800-kilometer cross-border underwater electricity interconnector to allow Singapore to import electricity from Australia’s planned giant solar generation installation.

Worldwide, however, only 4 percent of grid applications made between 2018 and 2021 have so far resulted in a grid connection. At least $21.4 trillion has been estimated as the worldwide cost to double the length of the existing electricity grid lines to 152 million kilometers by 2050 to support the global net-zero target, according to a new Bloomberg NEF study.

As part of its Belt and Road Initiative, China has massively invested in domestic grid assets within other countries including in Europe.

At the November 2021 United Nations Climate Change Conference (COP26) in Glasgow, the International Solar Alliance, India, France and the UK launched the Green Grids Initiative (“One Sun, One World, One Grid”). Backed by more than 80 governments, the initiative calls for connecting 140 countries with a global green energy grid to resolve intermittency problems and spread cheap solar and wind energy around the world. 

India’s Prime Minister Narendra Modi explained the initiative’s rationale: “[S]olar energy is only available during the day and is dependent on weather conditions. [A global grid] is a solution for this very challenge. It will enable us to provide clean energy, everywhere, at all times. … This creative initiative will not only reduce our carbon footprint and the cost of energy, it will also open up new avenues for cooperation between different regions and different countries.’’ 

The idea is not new. As part of its Belt and Road Initiative, China has massively invested in domestic grid assets within other countries (including in Europe) and promoted ultra-high-voltage cables for electricity exports, dubbed the “intercontinental ballistic missile” of China’s power industry.

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