Unlocking Clean Energy Transitions: IEA Report Highlights Importance of Power System Digitalisation in Developing Markets

A new report by the International Energy Agency's (IEA) 3DEN initiative emphasizes the crucial role of digital technologies in enhancing the efficiency and integration of power grids. The report warns that a lack of investment in grid digitalization could impede the energy transition and result in increased costs, especially in emerging and developing economies.

According to the IEA, global grid investments could save an estimated USD 1.8 trillion by 2050 by leveraging digital technologies to extend the lifespan of grids. These technologies not only facilitate the integration of renewable energy sources but also minimize supply interruptions. Failure to upgrade and digitalize grid infrastructure properly, however, could lead to a significant reduction in economic output in emerging and developing countries, amounting to nearly USD 1.3 trillion. Such a scenario would result in reduced productivity, lost sales, and unnecessary expenses on backup generation, jeopardizing net-zero targets.

The report, titled "Unlocking smart grid opportunities in Emerging Markets and Developing Economies," is the flagship publication of the 3DEN initiative. It will be presented at the IEA's 8th Annual Global Conference on Energy Efficiency, emphasizing the importance of digitalization for efficiency, resilience, and decarbonization.

The demand for electricity is rapidly increasing, with the IEA projecting additional consumption of approximately 2,500 TWh by 2030 in emerging and developing economies (excluding China). As electrification expands and renewable energy sources become more prevalent, sophisticated approaches are needed to match demand and generation, especially during peak periods. However, chronic underinvestment has left many electricity grids ill-equipped to handle these challenges, leading to supply interruptions that can disrupt critical infrastructure and impact human well-being. Additionally, technical losses in grids contribute to approximately 1 gigaton of CO2 emissions annually.

Digitalization is considered a critical enabler to address these obstacles. It enables utilities to predict demand and supply imbalances, identify and rectify faults efficiently, and enhance the reliability and security of power systems. However, current global investments in grid infrastructure fall significantly short of the requirements for achieving mid-century net-zero emissions. The IEA estimates that annual investments need to more than double, reaching around USD 750 billion by 2030.

Dr. Fatih Birol, Executive Director of the IEA, stressed the importance of upgrading and digitalizing grids, stating that they are essential components of the energy transition. He emphasized that while attention often focuses on technologies like solar panels and electric vehicles, the grid's role in connecting everything should not be overlooked. The longer the delay in grid modernization, the more costly it will become.

The 3DEN initiative, supported by Italy's Ministry of Environment and Energy Security, aims to expedite power system modernization. In conjunction with the initiative, the ministry has launched a pilot smart grid program managed by the United Nations Environment Programme (UNEP) in Brazil, Colombia, India, and Morocco. The insights and lessons learned from these projects inform the IEA's analysis and policy guidance.

The report marks the beginning of a series of IEA 2023 publications on grids and digitalization. Future analyses will delve into the necessary shifts in electricity landscapes for net-zero objectives and propose policy actions to address these changes while ensuring security, affordability, and sustainability.