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The issues to tackle when looking at Electricity supply on a global scale are:
Universal Access
In 2015, the United Nations established Sustainable Development Goals (SDGs), one of which is to ensure access to affordable, reliable, and modern energy for all by 2030. However, as of 2016, 1.1 billion people still did not have access to electricity, and many others had an inadequate, unreliable supply - primarily in rural areas of sub-Saharan Africa, India, and Southeast Asia. Universal energy access by 2030 will not happen, based on the current electrification path.
Of the additional needed investment, 95% must be directed to sub-Saharan Africa, according to the report. Scaling up investment in electricity access requires the right policies and investment frameworks, and approaches that connect existing but uncoordinated initiatives will be needed.
According to the International Energy Agency, present electrification efforts will not keep pace with population growth in sub-Saharan Africa, and the global citizenry that is doing without will become increasingly concentrated there. A lack of investment in generation plants and network infrastructure, subsidized tariffs that do not cover the cost of supply, poor governance, and insufficient legal security have contributed to this situation.
Until recently, nearly all of those who had gained access to electricity worldwide did so through new grid connections, and about 70% of those who have received power since 2000 have done so via fossil fuels. In recent years, however, large-scale renewables (mainly hydro and geothermal) have been the source of over one third of new grid connections, while decentralized resources, such as solar home systems and microgrids, have supplied an increasing amount of electricity access. This trend is expected to accelerate.
Technology improvements are creating opportunities to make progress on universal electricity access; the declining cost of solar, cheaper and more efficient lighting and appliances, and new business models that make use of digital and mobile platforms have increased the solutions available to those doing without. In order to realize the broader social and economic benefits of electrification, it will require looking beyond household connections and taking into account the electricity used for business and agriculture.
The short-term impact of universal electricity access on greenhouse gas emissions and climate change is expected to be minimal, as the overall increase in demand will be relatively small (though the exact modes of electrification will determine long-term impacts). Providing electricity for all by 2030 would require annual investment of $52 billion, or more than twice what has so far been mobilized under current and planned policies, according to a 2017 report published by the International Energy Agency.
Electricity System Integration
Power pools in the US, created in the 1970s, were the first regional organizations of this kind, and were later turned into true regional markets. They were followed by the National Electricity Market (NEM) in Australia, the European Internal Electricity Market (IEM), the Regional Electricity Market (Mercado Eléctrico Regional, or MER) in Central America, the Southern Africa Power Pool (SAAP), and others. Some have reached an advanced level of maturity and integration, while others are still at early stages. Regional electricity markets are sharing resources, reducing costs, and increasing the security of supply.
There is a global trend towards the integration of national, state, and local electric power systems in order to create supranational or regional electricity entities. These entities are referred to as “pools,” “interconnections,” or “regional markets,” depending on their organization.
The efficient utilization of electricity generation resources that are too large for a single country, as is the case with some hydro projects, or are too intermittent, like large-scale solar or wind farms, is made possible by the creation of regional markets with enough size to exploit economies of scale and dilute intermittency.
Regional markets also make it possible to extend the use of natural resources, such as wind or solar, which are abundant in some territories but not others, across larger geographical areas.
Regionalization also enables the creation of liquid, efficient markets in individual provinces, states, or countries which would otherwise be too small to sustain effective competition. Markets must be supported by technical, economic, and institutional analyses of both current systems and likely future iterations. Regional power trade, and the efficient utilization of large generation projects, require strong, cross-border network interconnections. Regional trade also requires careful market design, and clear rules for transmission investment planning, cost allocation, and congestion management.
The creation of regional markets and the construction of expensive, cross-border inter-connectors, which in some cases may deserve the classification “supergrids,” requires significant amounts of political will and the careful assessment of trade-offs; regional electricity markets are usually just one component of wider regional agreements that encompass other economic sectors.
Electrification of the Economy
The most promising electrification opportunities are found among the largest polluters. In order to hit carbon dioxide emission targets set out in the 2016 Paris climate change agreement, it will be critical to electrify energy uses now powered by fossil fuels.
Only a few energy technologies enjoy favourable policy support, such as PV (solar photovoltaics), onshore wind, electric vehicles, and energy storage. Areas with untapped potential include energy efficiency, bioenergy, and carbon capture and storage. Increased financial support is needed in order to build stronger and smarter infrastructure, including transmission technologies.
Globalization allows for the faster deployment of proven related technologies, and can enable the private sector to build sustainable business models that both boost the electrification of the global energy system, and mitigate climate change.
Heating and cooling in buildings, and industrial activity, currently account for approximately 40% of final energy consumption, according to the IEA report. Buildings can therefore play a major role in transforming the global energy system; increased efficiency in terms of heating, cooling, lighting, and materials could substantially ease demand, which would in turn ease the burden on the system as a whole.
The electrification of the transport sector could significantly effect the global energy system, though there is still a long way to go for it to have a real impact on the reduction of carbon dioxide emissions. Speeding up the electrification of the transport sector, through improved urban planning and increased public transportation, as well as the integration of grid edge technologies, will require major technological development, investment, and policy support. Industrial energy demand is projected to increase by about two-thirds by 2060, according to the IEA report, and particular focus should be placed on strategic sectors such as iron, steel, and chemicals.
In addition to introducing electric power into industrial processes whenever possible, many opportunities exist to curb demand growth - such as bolstering manufacturing efficiency, and optimizing locally available resources and materials. Both national and global policies must support energy technology innovation at all stages, from research to commercial deployment, in order to reap the security, environmental, and economic benefits of energy system transformation.
According to a 2021 World Energy Outlook report, the energy sector could reach carbon neutrality (the elimination of new emissions) by 2060, through a combination of electrification and energy efficiency. Market forces alone will not push related technological development sufficiently, and will have to be complemented by public policy and clear rules.
Energy-Related Emission Reduction
Energy demand grows alongside population growth, and alongside increasing standards of living; improvements in energy efficiency meanwhile act as a counterbalance. Full decarbonization of electricity is key for achieving a low-carbon economy. The energy consumption required to support human activity is responsible for about three quarters of the world’s greenhouse emissions, which are in turn causing climate change.
The portion of global energy demand served by electricity is already substantial, and expanding further. There is therefore a clear need to decarbonize the electric power sector itself, in order to help guarantee the sustainability of human development. How and when this is achieved will have important implications for the broader process of decarbonizing the global economy.
There are good reasons to prioritize the decarbonization of electricity over other energy carriers, such as hydrogen; electricity can be more easily decarbonized, for example, and it can be produced in many different ways with low associated emissions of greenhouse gases. It is technically viable, and economically affordable, to produce electricity from renewable energy sources such as solar, wind, geothermal, hydro, and biomass. Nuclear generation of electricity is another proven and powerful alternative - though it is often associated with problems like nuclear proliferation, nuclear waste, and accidents.
Electricity is wonderfully versatile, and can replace the utilization of fossil fuels in numerous areas. Mobility is one promising example - in the form of electric vehicles including light road vehicles, and railways. Cooling or heating buildings, with the use of heat pumps, is another.
Other trends, such as decentralization and digitalization, may have a significant influence on decarbonization. Disruptive advances in storage technologies such as batteries may be a key factor in full electricity decarbonization, for example, as they can mitigate the intermittency effects of some renewable energy production resources. However, the extent to which storage technologies will be required in decarbonized power systems is an area of active research.
Far-sighted policy measures, developed with adequate regulatory approaches, will be essential to guide market forces and private investment towards decarbonization, while innovative business models can contribute to this transformation process. The decarbonization of economies is a global endeavor. Countries must collaborate, particularly the three that make the largest collective contribution to greenhouse gas emissions: the US, China, and India.
Electricity Decentralization
Power System Resilience
Distributed energy resources such as solar photovoltaics (PV) that turn light into power, energy storage units, electric vehicles, and microgrids are transforming electricity systems. While these resources still play a relatively minor role in the provision of electricity services, their deployment is increasing and their impact is being felt. Distributed energy resources are transforming the ways electricity systems are planned, operated, and used.
As of 2016, distributed solar PV accounted for nearly 13% of all US generation capacity additions, according to the US Energy Information Administration. Decentralized power is not always clean, however; the same trends driving the deployment of distributed solar affect other energy sources. Natural gas-powered combined heat and power units and fuel cells, for example, accounted for 8% of all US generation capacity as of 2015, and provided more than three times the capacity of solar in the country, according to GTM Research.
Germany’s power system is one of the most striking examples of decentralization; 98% of the country’s solar PV resources are connected to the distribution grid there, according to a report published in 2017 by the research organization Fraunhofer, and 85% of this capacity comes from installations that are smaller than 1 megawatt. Meanwhile one in five customers in Hawaii, and one in 10 homes in California, now have a rooftop solar PV system.
Distributed energy storage resources are being used to defer investments in transmission and distribution networks, replace natural gas- and petroleum-fired “peaker” power plants, and reduce customer bills. Decentralization is not limited to the developed world; microgrids and off-grid energy resources are electrifying areas of India and sub-Saharan Africa that centralized utilities cannot reach.
Decentralization enables consumers to better express their preferences, improves the production and delivery of power, and brings electricity to communities that are in dire need. However, if not deployed with care, distributed energy resources can result in dramatically increased power system costs, and foster inequality among resource owners and non-owners.
Organized electricity markets must be reformed, in order to enable these resources to compete effectively and to reflect the new power sector reality. In addition, due to the power lost when charging and discharging, energy storage resources may actually increase emissions. This calls for a sound regulatory framework, which includes a system of pricing and charges that accurately reflects the value of consuming or producing power at different times, and locations - and which also changes the way distribution utilities are remunerated, enabling them to take full advantage of distributed energy resources.
Extreme weather events, a potential failure of climate change mitigation efforts, cyberattacks, and natural disasters rank among the top ten global risks in terms of likelihood and impact, according to a report published by the WEF in 2019 - and they pose specific threats to the availability of affordable energy.
Systems need to be hardened against threats like natural disasters and cyberattacks. The tangible impacts of climate change are increasingly evident, and developing adequate responses when it comes to energy security requires new forms of cooperation between the public and private sectors; preventive measures are also needed for potential cyberattacks and terrorism. These threats pose risks to critical infrastructure, and to entire economies and societies.
Over the course of the past decade, hurricanes, wildfires, flooding, and cyberattacks have amplified an urgent need to make electricity grids more resilient - to harden and smarten them, in order to blunt potentially devastating social and economic consequences. For example, a six-hour winter electricity blackout in France could exact more than €1.5 billion in related costs for households, businesses, and vital institutions there.
Building genuine resiliency means hardening the global power system against high-impact, low-frequency events, and fostering an ability to quickly recover from these events - which can threaten lives and devastate electricity generation, transmission, and distribution systems, not to mention related systems such as natural gas pipelines and telecommunications networks, according to the Electric Power Research Institute.
The financial cost of threats such as cyberattacks is also rising (the total cost of cybercrime for businesses over the next five years is expected to reach $8 trillion). Meanwhile, disasters in the Asia-Pacific Region over the past 40 years have cost some $1.3 trillion, and every day the region incurs $126 million in direct physical losses because of extreme weather events and geophysical hazards like floods, according to the Asian Development Bank.
Beyond the immediate financial cost, cyberattacks such as the WannaCry ransomware attack in 2017 disrupted critical and strategic infrastructure around the world, including government ministries and energy companies. WannaCry highlighted a growing trend of cyberattacks targeting strategic industrial sectors, and raised fears that in a worst-case scenario attacker could trigger a breakdown in the systems that keep entire societies functioning.
Digitalization in Electricity
Digitalization is creating new opportunities, but also creating cyber security risks. The power sector is becoming increasingly digitalized, as computation and control technologies are embedded in systems around the world. This is spurring value creation, while creating cyber security risks.
Digital technologies make it easier to communicate the value of electricity services with greater accuracy, as consumers become increasingly price sensitive and engaged. Meanwhile sensors and metering technologies are providing new visibility into power system conditions, and digitally-enabled power electronics and infrastructure are providing grid operators with an ability to act on newly-available information.
Digitally-enabled demand-side resources, such as heating and air conditioning units and water heaters, are now active participants in the PJM market, which is the largest electricity market in the US. Nearly 11 gigawatts of demand-side resources provided electricity services in the PJM market in 2015 and 2016, and were the source of roughly $825 million in revenue in 2015. Meanwhile, companies including Amazon and Google sold more than 4.5 million digital “smart” thermostats in the US and Europe in 2016, enabling home and business owners to take greater control of their electricity use; increased participation like this provides a case study for the potential impact of the Internet of Things, which strings household devices together with online connectivity.
Greater digitalization is also expanding the deployment of advanced metering infrastructure. Over 60 million smart meters now measure the consumption of more than 40% of the buildings in the US. Smart meter deployments in the European Union are expected to reach 72% of consumers there by 2020, while China alone had deployed roughly 350 million smart meters as of 2016. Digitally enabled meters, paired with mobile technologies, are enabling new payment models that help bring power to some of the least electrified parts of the world.
As digital technologies collect valuable data, it creates the need for rules regarding how to securely manage this data, and new regulations that ensure utilities, and other power sector stakeholders, are adequately prepared for cyber threats. Digital grid infrastructure and data collection are meanwhile enabling more active network management; in the United Kingdom, UK Power Networks has developed a program to actively manage the output of wind power plants, enabling it to more quickly and economically interconnect generators and demand. Increased digitalization of the power system has also created new vulnerabilities, however - as demonstrated by the 2015 cyber-attack on the Ukrainian power grid.
ELECTRICITY
Global electricity systems are undergoing the most profound set of changes since Thomas Edison’s inauguration of the Pearl Street Station, the world’s first commercial power plant, in 1882. In developed economies, distributed energy resources and digital technologies are transforming system planning and operations.
These technologies are also creating opportunities to bring electricity to the more than 1.1 billion individuals who still lack access to an essential commodity. The threat of climate change has initiated a push for electricity decarbonization, and spurred efforts to electrify industry and transportation. Meanwhile efforts are underway to expand regional markets and create greater geographical interconnections, and to ensure the security of supply in the face of cyber threats and natural disasters.
