Nowadays, power distribution networks are taking on a much more central role in energy systems due to the mainstreaming of decentralized, smaller scale renewable generation alongside the spread of distributed energy resources such as residential or commercial and industrial (C&I) rooftop photovoltaics (PV), home batteries as well as electric vehicles. The grids of the future will be more open and participatory becoming the primary entry point into the power system for new actors such as demand-side aggregators, charging point operators and prosumers. Moreover, according to Bloomberg New Energy Finance (BNEF), the size of new power plants will be six times smaller by 2050 compared to today, moving the average size of European facilities from 562 MW to 32 MW.
In order to ensure an increasingly reliable service within this evolving scenario, distribution network operators need to play the role of orchestrators in energy systems deploying investment programs to make grids more robust and reliable, including through advanced technologies that enhance network automation and control capabilities. In addition, for a real transition towards a more productive, efficient and environmentally conscious world, distribution grids need to embrace new sustainability principles, encouraging the use of electricity as the simplest and most natural choice for all citizens to contribute to a net-zero future.
At Enel we plan to unify the management of all our networks around the world, and for this reason we are developing a new global grid operating model, pursuing an innovative platform organization. At the same time, we are redesigning a large portion of our operations leveraging on digitalization and the strengthening of our computational capabilities to process increasingly larger volumes of data.
Between now and 2030, we will deploy at least 60 billion euros of cumulated investments in distribution networks, of which approximately 70% to further improve quality and resilience while more than 20% in connections, which benefit from the growing demand driven by urbanization and electrification of energy consumption. At the same time, around 10% will be devoted to further digitalizing the infrastructure. Geographically, around 60% of our investments in networks for 2021-2030 will address Europe.
At the operational level, these investments will enable us to reach approximately 77 million end users in 2023, delivering 512 TWh of electricity, with a projection to reach about 90 million end users by 2030. The way in which electricity will be delivered across networks is going to change significantly in the coming decades. According to the current policy targets, the International Energy Agency (IEA) estimates that global renewable capacity will represent 58% of total installed capacity by 2040, increasing by almost three times from the 2.7 TW reached in 2019.
As a consequence of the above transformation, in Europe the share of generation capacity directly connected to distribution grids is expected to grow from the current 24% to 67% in 2050, according to BNEF, turning electricity grids into the real bedrock of the energy transition.
Towards this aim, we are leveraging on Grid Futurability®, which is the transformation of conventional distribution networks into Smart Grids that couple the use of traditional equipment with innovative digital solutions. As a global player, serving both rural areas and some of the largest megacities on the planet, our Group is on the pathway to develop an integrated and unique operating model in order to manage the transformation of the traditional distribution business model and the evolution of power grids into resilient, participatory and sustainable platforms.
Grids will need to be more resilient in order to provide a reliable service in terms of quality and continuity, as in the future more and more stakeholders will depend on electricity while climate change could imply extreme operating conditions. Our Global Infrastructure and Networks business line is committed to continuously innovate assets and processes to enhance the Group’s grid reliability, including by deploying telecontrol and advanced sensors, building new digital substations and streamlining of emergency response.
Second, electricity networks should develop into inclusive and participatory platforms, fostering the engagement and interaction of all stakeholders, unlocking new opportunities in terms of innovative business models, services and shared value. By leveraging on our digital technologies and distinctive intellectual property value, we are opening a new era of grids where we play the role of “orchestrator” of the different stakeholders interacting in a new, flexible system, optimizing services and business solutions, technologies and processes.
Third, being a sustainable infrastructure operator is not only about connecting more and more renewable producers to the grid, but also about adopting a holistic approach that involves the entire energy ecosystem towards the achievement of the UN Sustainable Development Goals (SDGs). Our vision for sustainable grids includes specific initiatives to extend the useful life of grid components and, instead of discarding them, reintroduce them within the Group’s supply chain or in the supply chains of other sectors in order to process new products. In line with a circular economy approach, we also aim at introducing as many sustainable and recyclable raw materials as possible to maximize their economic value and reduce their environmental impact, as well as CO2 emissions from the Group’s assets. Moreover, in order to secure energy access to all, we work to expand its grids and we are even developing off-grid connections to new rural clients in the regions where we are present.
In line with the strategy presented in November 2020, we are enhancing the impact of Grid Futurability® in the energy transition by combining our unique expertise in managing regulated power distribution grids with third parties’ financial resources, with the aim to innovate the way value is created.
Unlike in the traditional “Ownership” model, in which we are the sole or majority shareholder of the acquired company, in its new “Stewardship” business model, we acquire minority shareholdings and supports value creation by providing the Group’s management capability, leveraging on our global scale and purchasing power, digital technologies and platforms. In this scenario, we expect to implement Grid Futurability® in urban or rural contexts anywhere in the world, expanding our global presence and accelerating the energy transition by distributing electricity in a sustainable and affordable way.