Strategic and political considerations for power sector transformation
January 2025 | SPECIAL REPORT: ENERGY & UTILITIES
Financier Worldwide Magazine
January 2025 Issue
Over the past few of years, countries, international organisations, local organisations and businesses alike have increasingly come to realise that clean power is critical to realising the clean energy transition and meeting the world’s energy demands and ambitious climate objectives. Clean power, including solar, wind, batteries, long duration, energy storage, digitally enabled intelligent energy solutions, nuclear and other technologies have all grown considerably in recent years. The transition has been dominated by solar and increasingly batteries in the last five years, with over 500GW installed in 2023 alone. It is anticipated that up to 1TW of these technologies, dominated by solar and batteries, and some wind, geothermal and others, will be installed annually in 2026 or 2027 and this number will continue to grow. However, the transition faces significant hurdles, including the need for expanded transmission grids, securing critical materials, strengthening manufacturing capabilities, addressing supply chain dependencies and overcoming local resistance.
However, as has been reinforced by recent global commitments to doubling energy-efficiency, tripling renewables, tripling advanced nuclear and dramatically expanding long duration energy storage, these technologies have taken on increasing focus within the international leadership community. Strategically, this has been recognised, both locally as well as globally, and codified most recently as an Agenda for Action by 29 countries of the Clean Energy Ministerial. Momentum is clearly building as the international community begins to recognise that clean power is the backbone of our clean energy economy, and it is critical to provide robust, resilient, affordable and environmentally sustainable energy for the world’s population.
The strategic focus areas for power sector transformation in the coming years, include the priorities outlined below.
Improve planning and investment certainty. Building the understanding, adoption and use of advanced power systems, and the transmission and distribution grid planning tools, advancing and sharing regulatory solutions employed around the world to decarbonise the power sector, providing expert assistance, capacity building and technical knowledge to support clean energy planning, and sharing lessons among all stakeholders on options and implementing actions to achieve existing or proposed power sector goals – these actions would support longer-term planning and help establish clear policy and regulatory frameworks and market designs that are essential to attract sustained investment.
Modernise and expand transmission and distribution grids. Advanced grid and smart grid technology developments, as well as grid infrastructure planning, financing, testing and operations, are critical to realising the power sector transformation. Stakeholders should conduct new studies on smart grids, supporting the development of more resilient and flexible power and promoting funding mechanisms to finance multilateral research projects. These actions would support the adoption and use of technologies, and approaches that improve grid reliability and efficiency.
Unlock power system flexibility. Increasing the understanding and adoption of diverse solutions that allow power systems to respond quickly and flexibly to variations in electricity supply and demand, such as operational improvements, market design changes, advanced forecasting, grid expansion, generation flexibility, grid-scale energy storage, demand response programmes and advanced grid management software, are important actions. Likewise, increasing awareness of key challenges, opportunities and factors for success, such as the advancement and deployment of flexibility solutions, both in advanced and developing economies, and promoting a shared understanding of lessons learned, emerging best practices, and the value of smarter and more flexible electricity systems, as well as supporting capacity building and technical assistance, would help countries meet growing electricity demand while assuring reliable, resilient, sustainable and economically efficient power.
Deploy e-mobility infrastructure. It will be important to support the inclusion of e-mobility demands in national power sector planning and e-mobility charging infrastructure programmes, including ‘vehicle-to-grid’, by sharing lessons learned and promoting best practices in e-mobility infrastructure planning. Advancing strategic collaboration across relevant public and private sectors will help to demonstrate replicable and scalable models for successful infrastructure deployment and finance, and support developing countries with knowledge and technical assistance on e-mobility infrastructure deployment. These actions would enhance grid infrastructure deployment and capacity planning while accelerating the adoption of e-mobility options and charging infrastructure.
Strengthen energy supply chain resilience and sustainability. Exploring innovative policy solutions, opportunities to diversify supply chains for clean power sector components, implementing sustainability standards and enhancing mutually beneficial coordination efforts across value chains can help governments identify more resilient energy solutions. These actions would help assure diverse global supply chains for vital clean power sector components while expanding enhanced local manufacturing capabilities and a rigorous adherence to environmental standards.
Advance a just and inclusive transition. Implementing enhanced technical support and capacity building to address skills, workforce development and equity in power system transformation, while achieving electricity access and decarbonisation goals, supporting the economy and workforce planning of developing countries by providing insights on the employment, earnings, gross domestic product and other economic impacts from power systems solutions, and supporting developing countries’ clean power priorities and sharing knowledge and best practices from existing pilot projects, would help keep people at the centre of clean energy transitions.
At the country-level discussions happening at COP29 in Baku, there were strategic considerations involving access to capital, support for climate mitigation and adaptation resiliency in the most vulnerable countries, and the implications of the world’s average temperature increase exceeding 1.65 degrees Celsius in 2024. While there are constant changes within the international political landscape, these considerations remain of utmost importance.
These are only a few of the priority strategic areas for successfully realising a clean, resilient, secure and affordable power system as the backbone of clean energy economies around the globe. Additional considerations include cutting-edge knowledge and business strategies that emerge in systems integration of clean power systems, buildings, e-mobility solutions, power to X such as hydrogen, or hydrogen-derived fuel such as ammonia or methanol. Additionally, transformation will involve key industrial sectors beyond power to fuels, such as direct electrification of key processes, and strategic alignment with business and operations goals that will likely require previously passive end users to evolve to active market participants, whether directly or through partnerships. Realising benefit at systems-integration level, and for hard to decarbonise sectors, will require increasing coordinated and collaborative engagement. Public-private partnerships will cross the sector’s governance institutions and will require solutions that are beyond traditional regulatory. Within this framework, enormous business opportunity and value creation is poised to be realised through thoughtful and well executed strategies.
Doug Arent is the executive director for strategic public-private partnerships and Jal Desai is a systems engineer at the National Renewable Energy Laboratory. Mr Arent can be contacted on +1 (303) 384 7502 or by email: doug.arent@nrel.gov. Mr Desai can be contacted by email: jal.desai@nrel.gov.
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Doug Arent and Jal Desai
National Renewable Energy Laboratory
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