EY warns ‘inadequate’ grid investment risks curbing global renewables boom
UK slips back to fifth place in latest Renewable Energy Country Attractiveness Index with the US, China, and India leading the field
Renewable energy is thriving worldwide thanks to supportive market conditions, effective policy frameworks, surging investment, and technological advancements, yet potential development “bottlenecks” still lie ahead which could serve to jeopardise the rapid growth in capacity needed to hit global climate goals.
That is the warning sounded today by consultancy giant EY, which stressed the “critical” need for more investment and supportive policies were required to boost grid infrastructure to manage the expected surge in intermittent renewable energy capacity that is set to come online across major markets in the coming years.
The recommendation comes in the latest edition of its regular Renewable Energy Country Attractiveness Index, which ranks the world’s top 40 clean energy markets based on the attractiveness of the policy, technological, and market environment to clean energy investors.
While many leading markets – including the USA, China, India, and the UK – are continuing to accelerate the roll out of renewables capacity and supporting infrastructure, a huge increase in clean power capacity is still required over the coming decade to meet global net zero goals.
Earlier this year the International Energy Agency (IEA) published its landmark 2050 net zero roadmap for the global energy system, which emphasised the need for a monumental increase in clean power capacity worldwide over the coming decades.
By 2030 alone, the IEA estimates 630GW of new solar and 390GW of new onshore and offshore wind capacity will be needed every year to reach net zero emissions worldwide, which is around four times higher the record-breaking amount of new capacity added in 2020. Such rapid expansion in renewables capacity will also require major growth in grid capacity to accommodate the increase in intermittent renewables generation projects and electric vehicles, it said, highlighting the crucial role meaning energy storage and flexible grid technologies are likely to play.
At the moment, however, supporting grid infrastructure investment risks lagging behind investment in renewables generation projects, according to EY’s global renewables leader Arnaud de Giovanni.
“Increasing investment and policy support has enabled renewables growth to continue at breakneck speed,” he said. “If sustainability goals are to be met, however, a 50 per cent increase in grid spending could be needed over the next decade as markets adapt for a net zero future.”
Separately, the consulting giant’s latest Index shows the USA has retained the top spot in its rankings and is on track to retain pole position thanks to a raft of fresh initiatives from the new Biden administration that are designed to drive clean energy infrastructure investment. Meanwhile, China remains in second place in the rankings, just ahead of India in third, with both the Asian economic superpowers benefiting from favourable regulatory and investment conditions.
France has shot up one place in the rangings to fourth after announcing plans to further exploit its offshore wind potential, leapfrogging the UK which slipped has back into fifth since the last Index, despite the government announcing £265m for its next round of Contracts for Difference (CfD) clean power auctions.
The latest round of the clean power subsidy scheme is the UK’s largest to date, with offshore wind set to take around £200m-worth of contracts to deliver an estimated 7GW of extra capacity, and emerging technologies handed £55m, with £24m ring-fenced for floating wind turbine projects. Another £10m has also been set aside for established technologies such as onshore wind, solar, and hydropower projects, with hopes of delivering a further 5GW of capacity at highly competitive cost.
Over the summer the UK also signalled plans to use a similar CfD mechanism to ramp up hydrogen production in support of its aim of delivering 5GW of hydrogen production capacity by 2030, in addition to a separate £240m Net Zero Hydrogen Fund to support commercial deployment of production plants.
However, the rankings do not take into account the UK government’s fresh announcement last week that it is targeting a net zero power grid by 2035. Further policy support is also expected in the coming weeks as the government gears up to unleash its hotly-anticipated Net Zero Strategy ahead of the COP26 Climate Summit in Glasgow next month.
Elsewhere, the rankings show that corporate power purchase agreements (PPAs) continue to emerge as a key driver of clean energy investment growth, according to EY’s global power and utilities corporate finance leader Ben Warren, who is also chief editor of the index.
“Coupled with climate change, ESG considerations are still the most significant long-term drivers for renewables investment, as illustrated by the growth of the offsite corporate PPA market across the world,” he explained.
