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‘No energy transition without transmission’: tackling the grid connection bottleneck in solar

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corey coyle
“Many grid plans seriously underestimate the wind and solar capacities that are expected to be rolled out.” says Elisabeth Cremona. Image: Corey Coyle

This year, PV Tech Premium has paid particular attention to the need to accelerate financing in the global solar sector, with more interest than ever before in delivering the trillions of dollars needed to meet the world’s clean energy goals, and alternative financing options, such as green bonds, becoming an increasingly important part of the solar financing space.

However, a common thread to be drawn from many of these discussions is that a lack of investment is often not a limiting factor for expanding the global solar sector. Instead, a number of experts have suggested that it is a perceived lack of grid availability that has dissuaded investments into renewables in general, and solar in particular and that it is grid infrastructure, not solar projects, that is in dire need of financing.

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Earlier this year, PV Tech reported that Europe alone will lack 205GW of grid capacity for solar by 2030, as the commissioning of new projects outpaces the addition of new grid infrastructure to connect these projects to existing power grids.

These figures are drawn from a report from think tank Ember Climate, which suggests that the EU will need to invest at least €58.4 billion a year in transmission and distribution grids. This is a not insignificant portion of the €1.16 trillion needed in annual investment to meet the EU’s climate targets, according to another think tank, Institut Rousseau.

But raising money for such projects can be a challenge, as grids are often large infrastructure projects operated by national governments, rather than subjected to direct investment from private capital. Finding these funds and working with national governments around the world to prioritise connections for solar projects amid a rapidly changing energy landscape will be challenging if the world is to expand its grid capacity.

Global green bottlenecks

“It is clear that investor interest in renewable projects is only increasing so, at this point, it appears that funding is not really a problem,” begins Elisabeth Cremona, an energy and climate data analyst at Ember Climate and one of the authors behind the report ‘Putting the mission in transmission: Grids for Europe’s energy transition.’

“We need to ensure that investment in the underlying infrastructure which is critical to integrate these clean technologies – grids, storage and flexibility – keeps up.”

Ember’s report compares the plans made by Transmission System Operators (TSOs) in a number of European countries to the renewable power targets put in place by their respective national governments in the latest round of National Energy and Climate Plans (NECPs). These plans increased the EU’s 2030 solar capacity targets by 90GW, an impressive figure, but this increased ambition has, for the most part, not been matched by the TSOs’ plans for grid expansion to accommodate this planned capacity.

The most striking example is Portugal, which is aiming to install 20.4GW of solar capacity by the end of the decade, but its TSO, Rede Eléctrica Nacional, S.A., currently has plans for just 8.9GW of transmission capacity for solar projects. This shortfall of 11.5GW is the most in Europe and is the second-highest percentage shortfall, at 56%. That’s behind only Ireland, which has a 74% shortfall, with its TSO aiming to install 2.1GW of new capacity, compared to 8GW targeted by its latest NECP.

Perhaps more worryingly, even TSOs with more ambitious plans for solar are struggling to find space for new wind deployments, suggesting that European renewables, more broadly, will be hampered by a lack of grid availability. Denmark is among the leaders in new TSO capacity for solar, with TSO Energinet targeting 35.5GW of new solar capacity, compared to 11.7GW earmarked in the NECP, a percentage difference of 203%. However, Energinet is also on pace for a 52% shortfall in new wind capacity among its grids, demonstrating the difficulty in building grid infrastructure that can cater for a range of renewable power technologies.

“Ember’s latest report on national transmission systems shows that many grid plans seriously underestimate the wind and solar capacities that are expected to be rolled out, risking that grid development will be insufficient to support the integration of this capacity,” says Cremona. “Grid planning must be forward-looking enough for countries to be prepared and take full advantage of the benefits of the energy transition.”

It is a similar story in the US. Between 2021 and 2022, the capacity of renewable energy and storage waiting for grid connections increased by 40%, as investments in new renewable power projects outstripped those in grid connections.

“The solar industry at large has experienced delays connecting projects to grids,” explains Sonny Nguyen, PE, director of transmission and interconnection at US independent power producer (IPP) Vesper Energy.

“This is true across most markets, including PJM, MISO, and CAISO, and is largely due to delays related to processing and completing interconnection studies. As a result, we tend to see longer development cycle times, which require more capital and often lead to an increased development risk for projects.”

However, the situation in the US is perhaps less ominous than in Europe. Recent figures from the US Energy Information Administration (EIA) suggest that, in 2023, solar developers pushed back the commissioning dates for 19% of planned solar capacity, a slight decrease on the 23% of capacity delayed in the previous year. While the 2023 figure is still higher than the four-year average of delayed capacity seen between 2018 and 2021, this progress, however small, could help set a precedent for the European solar sector.

Raising investment capital

“Investment capital and a reliable, functional grid are equally important contributors to a future powered by renewable energy sources, whether for solar, wind or electric vehicles,” explains Nguyen, suggesting that additional funding and grid reform will be essential to facilitating the greater commissioning of renewable power.

“Overhauling our grid infrastructure will be a significant lift for regional transmission organisations (RTOs), independent system operators (ISOs) and utilities over the next decade.”

“We know that investment in grid infrastructure is necessary—there can be no energy transition without transmission,” agrees Cremona. “The European Commission estimated that grids in EU Member States will require investment of about €58.4 billion each year, but it seems that grid operators are already investing more than that.”

Cremona goes on to point out that, in 2022, distribution system operators (DSO) in Europe, those responsible for medium and low voltage grids, invested €35 billion into their infrastructure projects, while TSOs, which manage high and extra-high voltage grids, have announced plans to invest €28 billion per year. This is a total investment of €63 billion and suggests that, at least from a financing perspective, Europe is making progress.

“Our analysis shows that grid expansion in European countries is expected to accelerate over the next decade, indicating a shift in the right direction,” says Cremona. “Furthermore, plans of certain member states show that it is feasible to deliver grid infrastructure projects quickly, given the political will.”

Germany stands as an example of effective grid reform, with a combination of significant financing and Cremona’s call for “political will”. The TSO 50Hertz has already announced plans to invest €20.7 billion into grid infrastructure, more than quadruple the €4.8 billion invested over the previous five years, and was one of four TSOs to work on the first draft of a new network development plan (NEP) in 2023.

The NEP was then subjected to rounds of reviews and revisions before being confirmed in March this year. The plan includes the construction of 4.800km of new power lines alongside the reinforcement of around 2,500km of existing power lines. Five new high-voltage DC transmission lines, each with a capacity of 2GW, will be built.

“If the EU is serious about the energy transition, it must continue to keep grids at the top of its political agenda,” continues Cremona. “Making sure solar and wind can actually connect to the system is as critical as the panels and turbines themselves.”

From policies to co-location

Cremona also points out that if countries are unwilling to invest in new grid infrastructure in the short term, they will likely have to pay more in the long term. She uses the example of Spain, which in 2023 invested €2 billion to aid, as she called it, its “already constrained grid”, rather than invest the roughly €1.16 billion that would be required to expand its grid.

Examples such as these point to some of the other challenges associated with delivering grid infrastructure, namely a lack of awareness of the issue and an unwillingness to embrace potential solutions. Cremona calls for governments to “better identify and tackle the structural and economic reasons behind grid underinvestment.”

“Address grid connection queues with urgency—one way could be through shifting from a ‘first come, first served’ approach to a ‘first ready, first served’ cluster approach,” suggests Cremona. “This is what the US Federal Energy Regulatory Commission (FERC) has done to tackle massive grid queues.”

Cremona refers to FERC’s implementation of Order 2023-A in March this year to accelerate the grid connections of projects ready to be connected. While not enough time has passed to assess the long-term impacts of this reform, a key part of the order has been to place responsibility for assigning grid connections on ISOs, as they possess what FERC called “the most complete knowledge of the transmission system”.

“There is a huge opportunity to invest in people and resources to help reduce grid capacity challenges,” adds Nguyen, who praised FERC’s latest reforms as a way of better designating responsibility for new grid connections. “We’ve seen positive movement following the FERC’s recent efforts to increase ISO’s and utility accountability around improving interconnection processes.”

Cremona also suggests that support for “alternative grid solutions,” such as storage, could help lessen the burden on large-scale grid infrastructure. Earlier this year, Rimshah Javed, senior business development manager at Arenko, told PV Tech Premium that there is a strong business case for co-locating solar and storage, as “you know how you’ll make money on your asset”.

“This could include adding storage and flexibility, [such as] batteries and demand-side response, and innovative grid solutions such as dynamic line ratings and cable pooling.”

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