At least $14 trillion (£9 trillion) must be invested in the grid worldwide by 2050 to support an evolved power system, according to new analysis from BloombergNEF (BNEF).
It warned that without adequate investment, the grid could become a bottleneck, which it said would slow progress, as electric heating and transport drive up demand and the “tremendous growth” of wind and solar “strain the grid”.
Last year, around $235 billion (£166 billion) was invested into the power grid, although this needs to rise to $636 billion (£450 billion) by 2050 to support more power generation capacity, serve new demand and replacing existing infrastructure.
BNEF's Power Grid Long-Term Outlook 2021 report looked at how investment into power grids globally may evolve, finding that electrification of transport, heating and cooling lead to $2 trillion (£1.4 trillion) in global grid investment, which is roughly 14% of all cumulative investment by 2050.
Utilities will need to upgrade existing customer connections as a result of increased electrification as well as provide connections to new customers such as charging stations. The acceleration of both the pace of electrification and the associated grid investment could be supported by government policy, BNEF said.
In the UK, the government announced last year its Rapid Charging Fund, designed to finance connection costs for 350kW electric vehicle chargers on the strategic road network in locations where upgrades are “prohibitively expensive and uncommercial”.
Distribution grids are also to become more important in the coming decades, with BNEF citing the increases in smaller power plants that are closer to demand. It outlined how in its Economic Transition Scenario, the growth of both wind and solar causes the median power plant size globally to drop six-fold by 2050 to 158MW, resulting in more power plants connecting directly to the distribution grid. Investment in distribution grid therefore also increases to make up 63% of annual investment by mid-century, up from 52% in 2020.
When it comes to specific regions, the US falls behind Europe in grid investment due to what BNEF described as a “comparatively slow uptake of renewables”, although investment more than doubles and surpasses $100 billion (£70.7 billion) by 2043. This outlook could be changed however, especially considering Joe Biden becoming President and having the potential to action more ambitious investment in the grid.
Outside of the US and Europe, China is the single largest grid market in the world between 2020 and 2050, although there is an eventual slowdown in demand growth. However, over the 30 year outlook, one fifth of global investment – or $2.9 trillion (£2.0 trillion) – occurs in China, with ultra-high transmission systems continuing to dominate