Achieving Net Zero Emissions Could Potentially Stumble, Not Due to Renewable Energy's Financial Infrastructure Being Overpriced.
The global shift towards renewable energy sources, specifically solar and wind, has been impeded despite their prices becoming cheaper than those of fossil fuels. This conundrum remains due to obstacles in the technical, infrastructural, and market-related domains.
Economic geographer Brett Christophers contends in his book 'The Price is Wrong: Why Capitalism Won't Save the Planet' that the issue stems from the failure to acknowledge two fundamental truths about open markets. Firstly, private-sector investment is driven not by output prices, as commonly assumed, but rather by relative profitability. Secondly, electricity's unique characteristics render it poorly suited for market governance, resulting in suboptimal outcomes without significant government intervention.
A significant challenge hindering the clean-energy transition lies with outdated electricity grid infrastructure. In Europe, for example, approximately 1,700 GW of renewable projects are stalled due to bureaucratic obstacles and outmoded grid planning. This bottleneck prevents the full exploitation of renewable energy potential, leading to energy waste of €7.2 billion in seven European countries in 2024 alone.
The real-time nature of electricity demands high reliability and balance, which is often difficult to achieve with intermittent renewable sources like solar and wind. Without flexible grids equipped with storage capabilities, demand response, and upgraded transmission networks, large-scale renewable integration can lead to reliability issues and energy wastage.
Market rules and regulatory frameworks also pose obstacles, often being ill-equipped for the renewable era. Many grid operators and market designs still rely on outdated scenarios, impeding investment decisions and delaying renewables deployment. In regions like Africa, strict eligibility criteria for distributed energy resources can inadvertently dampen innovation and exclude smaller renewable projects.
To overcome these hurdles, concerted efforts in grid upgrades, regulatory reforms, flexible market designs, and governance improvements are essential. Only by addressing these challenges can the world capitalize on renewable energy's vast economic and environmental benefits.
Jayati Ghosh, a professor of economics at the University of Massachusetts Amherst, is a member of the Club of Rome's Transformational Economics Commission and co-chair of the Independent Commission for the Reform of International Corporate Taxation.
- In his book 'The Price is Wrong: Why Capitalism Won't Save the Planet', economic geographer Brett Christophers emphasizes that the lack of private-sector investment in renewable energy sources is due to the focus on relative profitability rather than output prices.
- The outdated electricity grid infrastructure serves as a significant hurdle in the clean-energy transition, with bureaucratic obstacles and outmoded grid planning causing approximately 1,700 GW of renewable projects to remain stalled in Europe, leading to energy waste worth €7.2 billion in seven European countries by 2024 alone.
- The intermittent nature of renewable sources like solar and wind makes it challenging to maintain high reliability and balance in electricity supply, a requirement that demands significant investment in flexible grids equipped with storage capabilities, demand response, and upgraded transmission networks to facilitate large-scale renewable integration without issues and energy wastage.
- Market rules and regulatory frameworks, often relying on outdated scenarios, can hinder investment decisions and delay renewables deployment, particularly in regions like Africa, where strict eligibility criteria for distributed energy resources can unwittingly stifle innovation and exclude smaller renewable projects.
- To effectively overcome these obstacles, it's crucial to prioritize grid upgrades, regulatory reforms, flexible market designs, and governance improvements. This comprehensive approach will ensure the world can maximize the economic and environmental benefits of renewable energy.
