Electricity grids and the energy transition

Investment in smart grids, a key pillar to boost the world's energy transition

In a recent report, the International Energy Agency (IEA) has stressed the urgency of increasing investment in electricity grids on a global scale in order to meet climate objectives, facilitate the connection of all planned renewables and thus advance the energy transition. According to its projections, some 600 billion dollars per year (more than 565 billion euros) must be allocated for this purpose by 2030, which is double the current figure.

In addition, this comprehensive study, entitled Electricity Grids and Secure Energy Transitions External link, opens in a new window., reveals the need to add or renew up to 80 million kilometres of grids by 2040. This is equivalent to the total number of electricity grids that exist on the planet today.

It is the first network report published by the agency in its history, and the first global study of its kind. It highlights a worrying “lack of ambition” in current investment, which could compromise climate targets and energy security. According to the IEA, urgent action is vital to avoid potential complications in power supply and the fight against climate change.

"The recent progress in clean energy that we have seen in many countries is unprecedented and a cause for optimism, but it could be at risk if governments and businesses do not come together to ensure that electricity grids are ready," warned IEA executive director Fatih Birol. "We either invest in grids today or face grid gridlock tomorrow."

Specifically, clean energy projects in "advanced" stages of development and awaiting grid connection total 1,500 gigawatts (GW) of power, according to the IEA. The number is five times the aggregate solar PV and wind capacity in 2022.

The report provides an overall assessment of the current state of electricity grids. It analyses several indicators that reveal that grids are not keeping pace with the emerging new global energy economy and risk becoming a bottleneck to accelerating the energy transition and ensuring electricity security.

Furthermore, it examines the urgent improvements that are required not only in the physical infrastructure but also in the way grids are planned and managed, quantifying the costs to the system if the delay in grid deployment continues. Finally, it provides key recommendations for regulators, highlighting what is needed in areas such as investment, regulation and planning.

Electric utilities, the silent giant of the energy transition

The paper confirms Iberdrola’s view that electricity grids are the silent giant of the transition. In line with the IEA’s conclusions, the company argues that investment in these infrastructures must double not only by 2030, but that this pace must be maintained until 2050. Specifically, its analysis indicates that for every dollar invested in renewable energies up to 2050, there should be another dollar earmarked for grids.

Furthermore, the IEA warns of the consequences of not investing in the right infrastructure in time and sustains that the repercussions of underinvestment are already evident, with rising congestion costs and renewable spill-overs [electricity generated by renewable sources that cannot be used]. If this situation is not addressed, according to their assessment, CO₂ emissions could double, and the share of renewables could fall from 60 % to 40 %.

To counter these challenges, the IEA has outlined six key areas for regulatory intervention. These recommendations include a comprehensive upgrade of grid planning, unlocking significant investments, removing barriers to grid development and expansion, securing supply chains, maximising the opportunities offered by digitalisation and, finally, investing in the education and training of a skilled workforce.

We are a world reference in smart grids

For the Iberdrola Group, grids are a key factor both for the electrification of the economy and for the revitalisation of the territories in which it is present. It is also a world leader in smart grids. The company considers regulated assets —together with renewable energies— to be key factors in its strategy.

The Iberdrola Group operates one of the largest distribution systems in the world, with more than 1.2 million kilometres of distribution and transmission lines, more than 4,500 substations and more than 1.6 million transformers, built and operated to provide a high quality and reliable service to more than 34.40 million electricity supply points.

Moreover, in recent years the Iberdrola Group has installed nearly 15 million smart meters worldwide and has incorporated remote management, supervision and automation capabilities into the grid.