In an article devoted to the new investments in electricity grids being made in the UK, the weekly newspaper The Economist commented, "The grid's days of quietly efficient obscurity are over." Gone are the days when electricity networks remained in the background in the energy debate, continuing to do their work in the shadows without attracting too much attention. Today, grids are at the center of the debate among politicians, investors and technicians in all industrialized countries, particularly in Europe, because without a profound overhaul of the infrastructure there can be no real energy transition.
Consumers’ new role
Today, the energy sector is undergoing a momentous change with the growth of distributed renewable generation, which also entails a new role for consumers. In the years ahead, an increasing proportion of electricity will no longer be produced continuously in large centralized power plants tied to fossil fuel resources, then travel in one direction to consumers. Instead, energy will come from renewable plants, whose production depends on the rhythms of the sun or wind, and from producers who are at the same time consumers who rely on the same infrastructure to receive energy or to feed the excess energy they produce into the system.
We already see this happening within the Group; every month, in fact, we add about 45,000 new producers or "prosumers" to our distribution networks in Italy, Spain, Latin America, and we have now reached 2 million prosumers connected to the grid.
The latest report from the International Energy Agency (IEA) notes that the global share of solar and wind power in total generation is set to double to 25% by 2028 from the current 13%, but also warns that grid bottlenecks now pose a significant challenge. "Waiting lists" to add new power generation systems to the grid in the United States have stretched to 20 times longer than they were in 2010. In France, solar and photovoltaic installations waiting to be connected have doubled since 2018. In Great Britain, there is 120 GW of renewable power waiting that will not be fed into the system until 2030. These times and costs threaten to slow the energy transition. That is why the IEA recommends that investment in grids should double from current levels to at least $600 billion a year by 2030, equaling investments allocated to renewables.
The role of grids must therefore adapt, and become even more flexible than in the past. Managing not only a unilateral and stable flow of energy, but also the variable and decentralized nature of renewable sources requires the development and implementation of innovative approaches to ensure grid stability, reliability and efficiency.
European grids also need upgrading, according to the EU
As efficient as they have proven to be in the old energy scenario, the current distribution networks are not yet ready to handle massive two-way and intermittent flow of energy, nor to absorb the growth in electrification demand that we expect in the coming decades.
By 2030, European grids will need to integrate an additional 700 to 800 GW of energy generated from renewable sources, 70% of which will come from decentralized resources. Nearly half of Europe's distribution grids are more than 40 years old, and the European Union estimates that €584 billion in investments in electricity grids will be needed over the next decade, a substantial portion of which will go to distribution grids.
Not surprisingly, in November 2023, the EU launched an ambitious action plan on the grids of the future, focusing on a number of key issues:
- accelerating the implementation of so-called "Important Projects of Common European Interest" (IPCEIs: ambitious large-scale industrial collaborations in sectors that are strategic for European industry, involving several Member States and typically seeing private and public sector collaborations);
- improving long-term planning; introducing regulatory incentives and increasing transparency with regard to grid tariffs;
- improving access to available funds by increasing the visibility of financing programs;
- streamlining permitting processes and creating more efficient supply chains through standardization of industry production standards (specifically on this issue, the Enel Group promotes and participates in the Open Power Grids Association).
Adapting grids to climate change
These are all crucial points, to which I would add at least one that remained in the background of the European action plan: the need to take action to adapt grids to climate change. While the energy transition increases the grids’ workload, climate change poses new threats to infrastructure due to increasingly extreme and frequent weather events. This requires new investments and regulatory frameworks to ensure infrastructure resilience.
For Enel, the critical importance of grids in the new energy scenario is clear. The Group recently presented its three-year business plan to the markets, where most of the investments laid out in the strategy (€18.6 billion, or 53% of investments in the period 2024-2026) will focus specifically on distribution grids.
Targeted investments
Of that €18.6 billion, 50% will go to improving "Quality, Resilience, and Digitalization", while 32% will be used for new connections and 18% will be dedicated to routine asset management. The vast majority (80%) of investments will be deployed in Europe, where the regulatory framework is more stable and provides greater certainty of return on investment. In Italy alone, we will dedicate investments of more than €12 billion to distribution networks, 47% more than in the previous three-year period. Another €2.8 billion will be allocated in the Iberian Peninsula, and €3.5 billion in Latin America, again with significant increases over the previous business plan.
With this strategy, we also want to send a message to the entire sector: the energy world is at a turning point. Now is not the time to prolong a dependence on fossil fuels that, in the long run, would only be more costly and harmful to the environment and to countries' energy independence. It is time to put grids at the center of our strategies, to build an effective, equitable and sustainable energy turnaround.