Global grid capacity is on track to triple by 2050 as power utilities scramble to accommodate a surge in electric vehicles and new renewable energy capacity, according to a new report by Oslo-based DNV GL.
The company’s latest Energy Transition Outlook sees electric vehicles accounting for half of all new car sales in Europe by 2027, and renewable energy supplying 80% of the world’s electricity by 2050.
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“The quality assurance and risk management giant said the electrification of energy demand would double by 2050 as transportation, buildings, and manufacturing all increasingly go electric,” Greentech Media reports. “Installation rates for distribution system transformers will double,” and “from 2030 onward, the bulk of capital expenditures on energy will switch from fossil fuel projects to electricity grids and wind and solar plants.”
But even so, rapid electrification won’t be enough in itself to meet the decarbonization targets in the Paris Agreement: DNV GL doesn’t see the first emissions-free year occurring until 2090.
The report projects energy spending rising 30% by 2050, to US$6 trillion per year, with most of that money shifting from operating costs and fuel to capital investments—another sign of a shift to renewables. Overall, energy spending declines from 5.5 to 3.1% of global GDP.
As the transition takes hold, “a growing fraction of wind and solar power on the grid will force many countries to redesign the way electricity markets work, bringing in market-based pricing signals to encourage greater flexibility,” Greentech notes. For established utilities, that will mean learning how to compensate renewable energy generators that bring in enough supply to drive down wholesale electricity costs.
“To speed up the transition, regulators and politicians need to rethink electricity markets to provide additional flexibility including storage, demand-side response, and interconnection capacity,” the company said in a release. It added that “business model changes may cause significant shifts in demand for products, and therefore for energy, as some sectors of the economy move from ownership to service ‘pay-as-you-use’ models.”
As the shift to renewables drops fossils into the role of supplying peak power demand, DNV GL sees northern Europe, North America, and China having to deal with short-term and seasonal shifts in renewable energy production, possibly by producing hydrogen or other fuels during periods of surplus.
The analysis also suggests an uncomfortable transition in some parts of the existing electricity system. “The time scales involved in planning and constructing electricity networks may require network operators to make decisions amid considerable uncertainty,” the report states. “Regulators will need to make decisions about the optimum allocation of the risks and associated costs of stranded assets. Large thermal generators will face considerably increased uncertainty.”
