IEA Report Highlights the Role of Power System Digitalization in Developing B2B Markets for Clean Energy Transitions

• June 06,2023

A recent report from the International Energy Agency's (IEA) 3DEN initiative underscores the importance of digital technologies in improving the efficiency and integration of power grids. The report cautions that insufficient investment in grid digitalization could hinder the energy transition and lead to increased costs, particularly in emerging and developing economies.

The International Energy Agency (IEA) states that by utilizing digital technologies to expand the lifespan of grid infrastructure, global investments in this area could result in potential savings of around USD 1.8 trillion by the year 2050. These solutions not only simplify the incorporation of renewable energy sources but also decrease supply interruptions. However, a failure to adequately upgrade and digitalize grid infrastructure could result in a substantial reduction in economic output in emerging and developing countries, amounting to nearly USD 1.3 trillion. This scenario would impede productivity, lead to lost sales, and incur unnecessary expenses on backup generation, posing a risk to net-zero targets.

The report, titled "Unlocking smart grid opportunities in Emerging B2B Markets and Developing Economies," serves as the flagship publication of the 3DEN initiative. The importance of digitalization for efficiency, resilience, and decarbonization will be highlighted in the presentation, which will be made at the IEA's 8th Annual Global Conference on Energy Efficiency.

The International Energy Agency (IEA) predicts a significant rise in electricity demand, particularly in emerging and developing economies (excluding China). According to their projections, these regions are expected to consume approximately 2,500 TWh (terawatt-hours) of additional electricity by the year 2030. This substantial increase in energy consumption reflects the growing needs and expanding economies of these nations. As electrification expands and renewable energy sources become more prevalent, advanced approaches are needed to match demand and generation, especially during peak periods. However, inadequate investment has left many electricity grids ill-prepared to address these challenges, resulting in supply interruptions that can disrupt critical infrastructure and affect human well-being. Additionally, technical grid losses are responsible for about 1 gigaton of annual CO2 emissions.

Digitalization is recognized as a crucial enabler to overcome these obstacles. It empowers utilities to predict demand and supply imbalances, efficiently identify and rectify faults, and enhance the reliability and security of power systems. The present global investments in grid infrastructure are considered insufficient to meet the necessary targets for achieving net-zero emissions by the middle of the century. According to the International Energy Agency (IEA), annual investments must increase by over twofold, reaching approximately USD 750 billion by 2030.

Dr. Fatih Birol, Executive Director of the IEA, highlights the importance of upgrading and digitizing grids, emphasizing that they are integral components of the energy transition. While attention often focuses on technologies like solar panels and electric vehicles, the role of the grid in connecting everything should not be overlooked. The longer the delay in grid modernization, the higher the associated costs will be.

This report signifies the start of a sequence of IEA publications in 2023 that will concentrate on grids and digitalization. Future analyses will delve into the necessary transformations in electricity landscapes to achieve net-zero objectives and propose policy measures to address these changes while ensuring security, affordability, and sustainability.