The low-carbon transition is coming thick and fast. Renewable energy is thriving as market conditions, policy decisions, investment and technology improvements push clean energy to new heights.
Amid the pandemic and recession, global investment in renewable energy capacity still grew 2% to $303.5bn (about R4.5-trillion) last year, while worldwide renewable capacity installations surged 45% compared with 2019 to 265GW, the fastest growth rate since 1999.
We are also approaching what could be a watershed moment in combating the climate crisis. The 2021 UN Climate Change Conference of the Parties (COP26) begins on Monday and rapid action is needed if the Paris Agreement goals are to be realised.
Momentum has been building in the run-up to the conference and, in April, a pledge by China and the US to commit to working together and with other nations to tackle climate change has sparked optimism for a breakthrough on climate policy.
With growing investment and policy support for renewables, the conditions appear ripe for renewable energy to continue growing at high speed. However, the sector must be careful to navigate around bottlenecks that could threaten this growth. Integrating increasing volumes of variable resources will put grid infrastructure under significant strain.
With growing investment and policy support for renewables, the conditions appear ripe for renewable energy to continue growing at high speed
— Paul O’Flaherty, Africa head of EY-Parthenon
To meet sustainability goals, a global 50% increase in grid spending could be needed over the next decade as markets adapt for a net-zero future. In addition, significant investment in the nearly 7-million kilometres of power lines around the world will be crucial in supporting transmission of increasing amounts of renewable energy, and helping manage volatility in supply and demand.
Renewable energy generation is flourishing as it becomes one of the most cost-effective ways to power homes, industries and future transport networks. The best locations for renewable generation assets tend to differ from those for legacy thermal generation assets, with the largest potential often found at sites far from the power grid, such as offshore or rural areas.
Renewables production and future grid development must also take into account weather conditions and emerging power sources and technologies such as green hydrogen, a fuel produced from the electrolysis of water using electricity generated from low-carbon power sources.
Attempts to upgrade legacy systems have traditionally been stymied by complex permitting processes, integration difficulties, and uncompetitive or challenging financing environments.
The need to accommodate variable capacity only adds challenges as markets try to create more connections in different or varied locations, as well as addressing the need to both store and trade power between markets.
As governments start to recognise and address these issues, how are different markets adapting grids built for fossil fuel generation to suit a carbon-neutral future?
The South African renewables sector has benefited from nearly 10 years of what has become a very successful renewable energy development programme. The Renewable Energy Independent Power Producer Programme has awarded more than 6,000MW of generating capacity to developers across a range of technologies.
Developers like the clarity of the process — there is no interference, it’s reputable and stable. As a result, several developers have been in the market for some time and have established themselves, with many more trying to enter. It is a relatively mature market. A number of these participants are global players and banks have become accustomed to financing these deals, creating an efficient market for renewable energy development in SA.
But the market has started to become somewhat of a victim of its own success, because of a growing connection bottleneck caused by a lack of grid availability. We now have a glut of renewable resources and a group of very proficient bidders eager to do more at very competitive rates. The challenge will be getting all of them on to the grid while maintaining stability.
Ongoing efforts to unbundle Eskom into separate generation, transmission and distribution businesses could help place more of a focus on adapting transmission to meet renewable generation needs.
Eskom's transmission development plan for the rest of the decade accounts for an expected reduction in thermal generation (with 11.4GW of coal and 0.3GW of gas set to be decommissioned by 2030) and 26.8GW of proposed new generation capacity — much of which will be “from renewable energy resources that are in areas with limited network capacity”, according to Eskom.
In fact, a total of 20.4GW of renewable capacity is expected to be added by 2030, and capital expenditure on the integration of renewables is expected to cost R22.7bn.
This indicates the government’s desire to support further development of renewables. However, there is a great deal of work to be done.
• O’Flaherty is Africa head of EY-Parthenon, EY’s strategy consulting arm
