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Grid Investment Must Outpace Renewables for Net Zero, BNEF Says

Photo Courtesy Karsten Würth

(Bloomberg) —

Global investment in power grids will need to outpace spending on renewable energy in order to achieve net-zero emissions by 2050, according to BloombergNEF’s New Energy Outlook published Tuesday.

The world will need to nearly double its grid network to 111 million kilometers (69 million miles), the researcher found — equivalent to almost three-quarters of the distance to the sun. The price tag for such an overhaul will be about $24.1 trillion, compared with $22.7 trillion in spending on renewable energy to meet the goal.

A revamp of the electricity network is one of several pillars needed to reach carbon neutrality by mid-century and keep global warming in line with the goals of the Paris Agreement, BNEF said. Others include massive investments in electric vehicles, nuclear energy, carbon capture and clean hydrogen. Wind and solar capacity will need to increase ninefold. 

The study includes a net-zero scenario in which the climate goal is reached by 2050, and a base case in which emissions are halved by that date.

“Renewables have been in focus for a while now, but grids are a key enabler,” said BNEF analyst David Hostert. “Annual global investment in both our base case and climate scenario reach two to three times historical annual investment, which has hovered around $300 billion between 2020 and 2023.”

Also See: The Giant Grid Bottleneck Threatening Climate Goals: QuickTake

To reach the net-zero goal, almost half of the estimated $24.1 trillion will need to be spent on distribution networks to homes and businesses, followed by $9.6 trillion on high-voltage transmission. Investment in electric-vehicle charging would account for the remainder. 

Investment in the power network will come in two phases, according to BNEF. A first wave will address current bottlenecks that are due to the current build-out of renewables, which are relatively decentralized compared to traditional grid planning. This will continue into the 2030s as generation centers like off-shore wind are linked to the places where people need electricity. 

The second wave, which BNEF says starts in 2035, will be driven by new power demand and focus mostly on the distribution grid as large industrial demand centers like hydrogen electrolyzers come online. 

China and India could defer most of their replacement costs until after this date, since most of their infrastructure is less than 30 years old. By contrast, in the US and Europe, maintaining and upgrading the aging network will account for about half of total grid spending this year, the researcher said.

© 2024 Bloomberg L.P.


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