What happens when insurance companies decide to withdraw and no longer cover the most at-risk areas? That is the theme at the heart of the new report by the environmental NGO, but also of "Sigma", that of the Swiss Re Institute. Analysis
"Flexibility solutions are now essential. However, they face a structural difficulty: their costs are decreasing faster than market rules evolve," explains Xavier Blot, associate professor at emlyon business school.
By naming their first edition "Wind farms are taking shape", the industry's players want to show a certain optimism despite a context that remains complicated for the sector. A look by Benoist Guillard, president of the Groupe romand pour l’énergie éolienne (GREE).
Bloomberg New Energy Finance has just updated its data. Electricity transmission and distribution costs will increase, but the consumer's bill could remain unchanged.
It's one of the most talked-about topics right now. What will be the cost of adapting electrical grids? Should consumers expect an increase in their bills? Bloomberg New Energy Finance (BNEF), one of the most reputable advisory firms, has just updated its energy transition scenarios. And devoted a report specifically to electrical grids. Here are some useful takeaways.
1️⃣
Tripling of investments According to the net-zero-by-2050 scenario, annual investments in grids will reach $811 billion by 2030, thanks to very strong growth in green energy, electric vehicles and other low-carbon technologies. According to BNEF, these investments are three times higher than those made in 2023.
In a transition scenario where investments are slower and are made only on the basis of economic profitability, spending will reach $483 billion by 2030, a 58% increase compared with the average investment observed during the first four years of this decade. As a reminder, in this second BNEF scenario, global warming does not meet the Paris Agreement; average warming is +2.6 °C.
Breakdown of grid investments under the Net Zero scenario.
2️⃣
Double the length of transmission networks In BNEF's net-zero scenario, the global electricity transmission network doubles, notably to connect remote locations where gigantic solar or wind farms are built, particularly in deserts.
By mid-century, three quarters of the electricity produced globally will come from solar and wind. "The distribution network, the low-voltage network that generally supplies consumers with electricity, lengthens less quickly, but new cables are necessary. Demand-side flexibility and small-scale batteries reduce the need for development of the distribution network," write BNEF experts.
3️⃣
The importance of digital technology The massive arrival of renewables and the fact that consumers are also becoming electricity producers are two factors changing the nature of grids. In the past, as BNEF experts write, generation was injected into the transmission network, then distributed via cables. Today, rooftop solar cells inject electricity into the grid, these flows become more complex and digital technologies help balance and maintain the grids while securing them.
According to BNEF, on average 12% of power grid capital expenditure between 2024 and 2050 will be dedicated to digital technologies. However, it turns out that investment devoted to digital may be even higher. In reality, grid operators are likely to have to invest more resources, notably with their software suppliers and in the cloud (digital cloud); capital investments are effectively becoming operating expenses.
"This poses a regulatory challenge: in most countries in the world, network companies earn a return as a fixed percentage on their capital investments; which means that shifting investment spending towards operating spending requires a new type of accounting regime," say the authors of the BNEF report.
Capital expenditure per MWh of electricity consumption.
4️⃣
No automatic increase in electricity bills New grid investments are expected to nearly double in Europe and the United States (the increase will be stronger in Asia and elsewhere). But according to BNEF, one cannot deduce that the portion charged to consumers will double similarly. If grid investments increase at the same pace as demand, tariffs will remain more or less constant.
The fact is most network companies worldwide amortize their investments over 30 to 45 years. Added to this is the rise of renewables. Since they do not incur fuel costs (the sun and wind are free), they could help reduce the energy share of consumers' bills.
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What happens when insurance companies decide to withdraw and no longer cover the most at-risk areas? That is the theme at the heart of the new report by the environmental NGO, but also of "Sigma", that of the Swiss Re Institute. Analysis
"Flexibility solutions are now essential. However, they face a structural difficulty: their costs are decreasing faster than market rules evolve," explains Xavier Blot, associate professor at emlyon business school.
By naming their first edition "Wind farms are taking shape", the industry's players want to show a certain optimism despite a context that remains complicated for the sector. A look by Benoist Guillard, president of the Groupe romand pour l’énergie éolienne (GREE).
Since its founding in 2021, the young startup has made it its mission to find a good compromise between energy production and plant growth. The solution is called "spectral filtering".
