Strategic Advisory
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In our ever-changing world, addressing the pressing issue of climate change and transitioning towards green energy sources has become an imperative. Higher instances of environmental calamities such as drought, flooding, and wildfires, as well as general temperature increases, are making agriculture less sustainable, cities less habitable and are all having a pronounced negative impact on economies.
These social and environmental impacts are disproportionately felt in developing countries still trying to pursue economic development to raise their populations out of poverty. Decarbonising an economy in an equitable and stable economic environment can happen, and International Financial Institutions (IFIs) are playing a pivotal role in assisting developing economies in their journey towards decarbonisation and the adoption of renewable energy.
Responding To The Crisis
In response to this growing crisis, the United Nations Sustainable Development Goals were drawn up. In energy terms, Goal 7 - Affordable & Clean Energy, Goal 9 - Industry, Innovation & Infrastructure, and Goal 13 - Climate Action, and the need for a green energy transition are key. Following the lead and ambition of these goals, and many other initiatives (the Paris Agreement, etc.), IFIs are increasingly financing new renewable electricity projects worldwide.
The goal is clear - affordable and clean access to electricity. And who wouldn't be excited about the prospect of a brand-new wind or solar farm? Silent sentinels that harness the power of the wind while creating copious quantities of clean, renewable energy. Governments like them, utilities like them, and IFIs like them. They are crucial to a green energy transition and vital for decarbonising an economy.
Challenges To Overcome
Renewable generation in the green transition, however, presents a unique set of challenges:
- Stranded Assets: The rapid introduction of new generation methods can lead to the creation of "stranded assets", investments that can no longer yield economic returns due to market and regulatory environment changes. While asset write-downs are challenging for developed economies, they can be nearly impossible in less developed ones.
- Decentralised Generation: Renewable electricity production tends to be more decentralised; the windiest/sunniest parts of the country are often far removed from the centres of population, individual solar/wind farms are spread across large areas, producing energy far from where it is needed. Older grids function around baseload providing centres – grid infrastructure grows outward from central power plants to population centres with higher demand. Without proper integration, outdated/weak grid infrastructure will render heavy generation investment almost useless. grid infrastructure grows outward from central power plants to population centres with higher demand. Without proper integration, outdated/weak grid infrastructure will render heavy generation investment almost useless.
- Intermittent Energy Production: Unlike traditional carbon-intensive energy generation, renewable energy sources fluctuate based on environmental conditions (e.g., sunlight and wind). Integrating non-synchronous renewable energy generation will change the system's behaviour, and achieving secure and economic operations will become increasingly challenging. Balancing (via flywheels, battery storage, etc.) a flexible grid to accommodate renewables in the energy system is essential.
The Solutions
However, these challenges are manageable and should be addressed. Resilient transmission and distribution networks can be built accordingly, plans can be developed, and grids can be designed to be sufficiently robust to facilitate new renewable energy. Leveraging our extensive experience in Ireland, ESB International is well-positioned to support the development of a modern grid network that can handle newly decarbonised production. We have developed, maintained and operated resilient electricity generation, transmission, and distribution infrastructure in Ireland for almost 100 years and internationally for five decades - transforming utilities, integrating renewables, maintaining generation capacity, and supporting and collaborating with the economies and utilities we work with. We understand the utilities' challenges because we are an integral part of one.
A Holistic View
Effective energy transition must be viewed as a whole product, not simply a new capital project. Physical infrastructure and a robust regulatory environment are critical to optimise assets. Effective plant management, maintenance and decommissioning, proper grid integration and local capacity development are essential to make a green energy transition sustainable in the long term. Otherwise, IFIs are simply sending 'good money after bad' and developing economies do not get the total value of funding and end up returning year-on-year for more assistance in an endless cycle. This results in IFIs missing out on long-term strategic development goals.
In developing economies, new sources of electricity are transformative, impacting society and political careers. The pressure on utilities, governments, and IFIs to provide renewable generation assets is immense. However, the effectiveness of a renewable generation asset is contingent on a robust transmission and distribution network. The network must be capable of handling the variable and fluctuating nature of renewable energy generation.
Utilising Expertise
Drawing on our unique experience, we collaborate with our clients to navigate regulatory, technological, and environmental challenges to deliver robust electricity infrastructure. As the world embraces low-carbon solutions, we have the expertise to guide our clients on that journey safely and are driven to make a difference.
Having faced the challenges of adopting high volumes of renewable energy in our home market, we have learnt the importance of dynamic, adaptive network management, extending the useful lifetime of existing assets, careful decommissioning, balancing baseload, and integrating new renewable energy on the grid. A quality network is a crucial element of a green energy transition. ESB International is bringing this expertise to utilities worldwide to help them on their decarbonisation journey.
To find out more about our world-leading strategic and advisory services, visit:
