The pathway to a successful energy transition

According to DNV, global electricity demand is set to double by 2050 as the world’s reliance on fossil fuels diminishes, requiring significant grid expansion to accommodate for an increased decarbonised energy system

These findings have been published in the company’s New Power Systems report which also pointed to the need for solutions to grid congestion and new business models to accommodate rising electricity demand and generation form wind and solar. The report concludes that grid expansion is affordable, thanks to growing efficiencies in grid technology and the increased electricity load, with DNV expecting global grid charged passed to consumers to remain stable or decline in the long term.

DNV report highlights

Notable points picked out by DNV from its New Power Systems report include:

• Electricity to constitute 37% of global final energy use by 2050, rising from 20% in 2023;
• A dramatic shift to renewables towards 2050 with wind and solar anticipated to generate half of the world’s electricity by 2040 and 70% by mid-century. By this date, 90% of electricity will be sourced from non-fossil sources;
• As variable renewable energy sources (VRES) expand, the need for short-term flexibility will double;
• Growing demand for new ancillary services such as synthetic inertia products and fast frequency response, and adapting market and regulatory frameworks to support these technologies is critical;
• Advanced AI and automated activation of demand response to play a key supporting role in grid operations and market predictions;
• Lithium-ion battery technology is set to play a dominant role, offering three times more storage capacity than hydropower and pumped storage by 2050 as energy storage grows in influence. Innovative market designs and advanced tariff schemes to incentivise automated demand-response, vehicle-to-grid and behind-the-meter storage systems are required;
• Power-to-hydrogen value chains will become a critical market element for renewable generation and need to be scaled through concerted investment efforts;
• Global grid capacity needs to grow 2.5 times its current size to enable the energy transition, with annual expenditure on grids more than doubling to US$970bn by 2050;
• Grid enhancing technologies offer potentially significant temporary relief with long-term solutions residing in accelerating the construction of new grid infrastructure and advanced controlling systems;
• Efficiencies in grid technology and increased electricity distribution will likely keep consumer grid charges stable or declining in most regions despite global grid expenditures rising from 15% to 25% of annual energy expenditure by 2050;
• Decline in renewable power costs suggests consumer prices are unlikely to rise. Electrifying end-use sectors will further enhance efficiencies and cost savings.
• In low-income regions, rapid GDP growth to offset a slight rise in household energy increases with the ‘green dividend’ offering an opportunity for governments to accelerate the energy transition and maximise the benefits of green electricity.

Systematic approach to the energy transition

“We believe in systems thinking, looking at the big picture, to consider how energy is generated, transmitted, consumed, and stored across all energy carriers,” remarked Ditlev Engel, CEO for Energy Systems at DNV. “There will be no transition without transmission. The new energy system will require data-driven solutions and policies that address all interconnections, from permitting to the integration of AI and cyber-resilience. Planning for a new wind farm must include a strategy for grid connection; similarly, GETs and new wire integrations require IT upgrades at most control centres.

“The pathway to a decarbonised power system is clear: renewables integration and grid expansion require significant investment, innovation, coordination, and commitment from all players, especially governments. As the world moves towards a greener future, addressing these challenges with a systemic and forward-thinking approach will be essential for a successful energy transition.”