ESG Investing

Global and Super Power Grids Grow in Size, Interest, and Investment

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Traditionally, energy generation has happened at the country or region level, with power stations generating electricity and feeding it through local networks to homes and businesses. This model has faced new public attention in the face of setbacks such as the near collapse of the Texas power grid in 2021.

Renewable energy technology offers alternative options to power grids, but those come with their own storage demands and market considerations. “Supergrids”—vast international smart grids that span countries or even continents—offer one potential solution.

Green Light for Supergrids

Governments and power companies have many reasons to take a more global view of energy generation. “We need the supergrids both to deliver the bulk clean energy but also to make sure it’s cheap,” Nicholas Dunlop, secretary-general of the Climate Parliament, told The Wall Street Journal in March. The Climate Parliament brings together a network of legislators focused on climate change and champions its own Green Grids Initiative, which aims to expand renewable energy generation capacity in energy-rich locations to share with others who have less via continental grids.

Backed by more than 80 countries and partnered with the World Bank and electricity supplier Electricité de France, the project aims to “accelerate the development and deployment of interconnected electricity grids across continents, countries, and communities, and improve energy access of the poorest through mini-grids and off-grid solutions.”

Governments and power companies have many reasons to take a more global view of energy generation.

Technology to Support Supergrids

The concept of global electric grids has been around for decades, but moving electricity hundreds of miles along conventional alternating current lines has not been economical because of the decay in power as it travels these long distances.

Researchers at the Birmingham Energy Institute in the UK are working to build an industrial-scale prototype of a high-voltage direct current (HVDC) system. Also called a power superhighway or electrical superhighway, HVDC technology allows power to be transferred between grid systems running at different frequencies.

Already being used within domestic grids, smart grid technology can also help enable the transition to supergrids by managing supply and demand and accommodating surges and scarcities of power.

EU’s Energy Interconnection Target

Europe is particularly keen to create a supergrid as it struggles to create a sustainable power supply. The European Super Grid, a collection of projects, seeks to create a network that will connect European countries, North Africa, and the Middle East, among other regions. The European Union has also set an interconnection target for each country to share at least 15% of the electricity that it produces with neighboring countries by 2030.

Another grid project aims to share solar power generated in the deserts of northwest India and Oman, with the next phase expected to run east from India through Bangladesh, Myanmar, and Vietnam. Connecting existing power grids throughout the Middle East, Europe, and Africa could create another extensive network.

Opportunities for ESG investors

A truly global electric grid may be further in the future, but private investment will be critical. Given the funding needed—”trillions of dollars,” according to a KPMG report—there will be ample opportunities for investors. As Teruyuki Ono, executive director of Renewable Energy Institute, says in the report: “Private capital will be essential in making the super grid happen.”

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