Global Clean Energy Transition Needs Trillions More in Grid Investments
A whopping $21.4 trillion in grid-targeted investments is needed by 2050 for the global transition to carbon-free energy, according to research from BloombergNEF. Let’s unpack.
BloombergNEF, a research unit of media giant Bloomberg, recently unveiled a new report measuring the extent of investments needed for the global transition to renewable energy and “net-zero” carbon emissions.
Updating the grid is an expensive proposition. Image used courtesy of Pixabay (photo by Andrew Martin)
For electric grid infrastructure alone, that shortfall amounts to more than $21 trillion globally—at scale with the United States' 2022 gross domestic product of around $25.46 trillion, according to the U.S. Bureau of Economic Analysis.
Overall, the global grid’s size would need to double by 2050 to build a renewable-exclusive energy mix that displaces fossil fuels with solar photovoltaic systems, offshore and land-based wind farms, hydrogen, nuclear, and carbon capture/storage (for emissions abatement).
The $21.4 trillion sum includes $4.1 trillion for maintaining the existing grid and $17.3 trillion for expanding it. These counts are based on projections in BNEF’s “Net Zero Scenario,” which assumes a sector-level approach with a fast and broad deployment of renewables and other technologies before 2050.
2050 Power Grid Overhaul
In the decade leading up to 2050, BloombergNEF projects that the annual investment for the grid transition will triple from $274 billion in 2022 to $871 billion annually. In practical terms, utilities won’t be incentivized to pursue this scale of spending without governments streamlining their permitting procedures, consolidating multi-agency review processes, and setting clear approval deadlines.
A regional breakdown of BloombergNEF’s projections for global annual grid capital expenditures from 2022 to 2050. “ETS” represents its Economic Transition Scenario analysis method, while “NZS” represents the Net Zero Scenario. Image used courtesy of BNEF
Breaking down that top-level number, BNEF says the annual expenditure on distribution networks will grow from $147 billion to $533 billion between now and 2050. And about one-quarter of the $21.4 trillion total will need to be earmarked for digitalization improvements, such as automation and control, energy monitoring, and other applications to extend equipment life cycles and improve efficiency and grid resilience.
BloombergNEF’s projections for cumulative power grid digitalization expenditures by region. Image used courtesy of BNEF
Meanwhile, distribution expansion could include adding bi-directional flow, remote monitoring, and distribution improvements. Transmission lines will continue to drive power balancing between grids while improving system reliability.
Overall, BNEF expects power lines to grow by 49.7 million miles by 2050—including about 42 million miles of above-ground lines, 7.4 million miles of underground cables, and 124,274 miles of submarine cables. Ultimately, that exceeds the amount needed to replace today’s grid.
However, one of the drawbacks of global grid expansion is that material supply chains will take a hit. With power grids being the top copper consumer over all other energy transition technologies, demand for the material in grid projects is expected to grow from 5 million tons today to 13 million tons by 2030, jumping to 23 million tons in 2050.
Tiny Slice of Total Transition Investments
The above grid projections are part of BloombergNEF’s larger New Energy Outlook 2022 report, based on two contexts of analysis: The “Economic Transition Scenario” focuses on cost-based technology advancements, while the “Net Zero Scenario” assumes a faster and broader deployment of renewables.
While substantial independently, the $21.4 trillion of power grid investments only accounts for 11% of the total $194.2 trillion needed under BNEF’s Net Zero Scenario. Grids also maintain an equal 11% share in the Economic Transition Scenario, totaling $119.5 trillion.