Solving the bottleneck problem in network connections in photovoltaic installations

Earlier this year, Photovoltaic technology reported that in Europe alone, there will be a shortage of 205 GW of solar grid capacity by 2030, as the launch of new projects will outpace the addition of new network infrastructure enabling the connection of these projects with existing electricity networks.

These figures come from a report by the think tank Ember Climate, which shows that the EU will need to invest at least EUR 58.4 billion annually in transmission and distribution networks. According to another think tank, the Institut Rousseau, this represents a significant portion of the €1.16 trillion needed in annual investment to meet the EU’s climate goals.

However, raising funds for such projects can be challenging because networks are often large infrastructure projects operated by national governments and not subject to direct investment by private capital. Finding this funding and working with national governments around the world to prioritize connections for solar projects in a rapidly changing energy landscape will be a challenge if the world is to increase its grid capacity.

Global green bottlenecks

“It is clear that investor interest in renewable energy projects is only increasing, so at this stage it seems that financing is not really an issue,” begins Elisabeth Cremona, energy and climate data analyst at Ember Climate and one of the authors of the report. Mission Broadcast: Energy Transition Networks in Europe.”

“We must ensure that investment in the core infrastructure that is key to integrating these clean technologies – networks, storage and flexibility – continues.”

Ember’s report compares the plans of transmission system operators (TSOs) in many European countries with the renewable energy targets set by national governments in the latest round of National Energy and Climate Plans (NECPs). These plans increase the EU’s solar capacity targets for 2030 by 90 GW, which is an impressive number, but these increased ambitions are largely unmatched by the TSO’s plans to expand the network to accommodate the planned capacity.

The most striking example is Portugal, which aims to install 20.4 GW of solar PV capacity by the end of the decade, but its TSO, Rede Eléctrica Nacional, SA, currently has plans for only 8.9 GW of transmission capacity for solar projects. This shortfall of 11.5 GW is the largest in Europe and represents the second highest percentage shortfall of 56%. It is second only to Ireland, which has a shortfall of 74%, and its TSO intends to install 2.1 GW of new capacity compared to the 8 GW assumed in the latest energy and energy plan.

Perhaps more worryingly, even transmission system operators with more ambitious solar plans are struggling to find space for new wind installations, suggesting that European renewables more broadly will be hampered by a lack of grid availability. Denmark is one of the leaders in terms of new TSO solar capacity, with TSO Energinet planning to build 35.5 GW of new solar PV capacity compared to 11.7 GW planned in the NECP, a percentage difference of 203%. However, Energinet is on track to have a 52% shortfall of new wind capacity on its networks, highlighting the difficulty of building network infrastructure that can support a range of renewable energy technologies.

“Ember’s latest report on national transmission systems shows that many network plans seriously underestimate expected wind and solar capacity, creating a risk that network development will be insufficient to support the integration of this capacity,” says Cremona. “Network planning must be forward-looking enough so that countries can be prepared and fully realize the benefits of the energy transition.”

It is a similar story in the USA. In 2021-2022, renewable energy and storage capacity waiting to be connected to the grid increased by 40% as investment in new renewable energy projects outpaced investment in grid connections.

“Across the solar industry, there have been delays in connecting projects to the grid,” explains Sonny Nguyen, PE, director of transmission and interconnection at U.S. independent power producer (IPP) Vesper Energy.

“This affects most markets, including PJM, MISO and CAISO, and is largely due to delays associated with processing and completing interconnection studies. As a result, we tend to have longer development cycles that require more capital and often lead to increased project development risk.

However, the situation in the US is perhaps less ominous than in Europe. The latest data from the U.S. Energy Information Administration (EIA) suggests that in 2023, solar developers postponed the commissioning dates of 19% of planned solar PV capacity, a slight decrease from the 23% of capacity delayed in the previous year. While the 2023 figure is still higher than the four-year average of capacity lags recorded between 2018 and 2021, this progress, while small, could help set a precedent for the European solar sector.

Raising investment capital

“Investment capital and a reliable, functional grid contribute equally to a future powered by renewable energy, whether it is solar, wind or electric vehicles,” explains Nguyen, suggesting that additional financing and grid reform will be necessary to facilitate more frequent deployment of renewable energy.

“The overhaul of our grid infrastructure will make a significant difference for regional transmission organizations (RTOs), independent system operators (ISOs) and utilities over the next decade.”

“We know that investments in network infrastructure are necessary – without transmission there is no energy transformation,” agrees Cremona. “The European Commission has estimated that networks in EU member states will require investment of around €58.4 billion a year, but network operators appear to already be investing more.”

Cremona further points out that in 2022, distribution system operators (DSOs) in Europe, responsible for medium- and low-voltage networks, have invested EUR 35 billion in their infrastructure projects, while TSOs that manage high- and very-high-voltage networks have announced plans to invest 28 billion euros per year. This represents a total investment of €63 billion, suggesting that Europe is making progress, at least from a financing perspective.

“Our analysis shows that network expansion in European countries is expected to accelerate over the next decade, which indicates a shift in the right direction,” says Cremona. “Moreover, the plans of some Member States show that, with good political will, rapid implementation of network infrastructure projects is possible.”

Germany is an example of successful energy grid reform, combining significant funding and Cremona’s call for “political will.” 50Hertz TSO has already announced plans to invest €20.7 billion in network infrastructure, more than four times the €4.8 billion invested in the last five years, and was one of four TSOs that worked on the first draft of the new Network Development Plan (NEP) in 2023

The NEP then underwent rounds of reviews and revisions before being approved in March this year. The plan includes the construction of 4,800 km of new power lines along with the strengthening of approximately 2,500 km of existing power lines. Five new high-voltage DC transmission lines will be built, each with a capacity of 2 GW.

“If the EU is serious about the energy transition, it must continue to keep energy networks at the top of its political agenda,” Cremona continues. “Making sure that solar and wind can actually connect to the system is just as important as the panels and turbines themselves.”

From policies to collocation

Cremona also points out that if countries are not willing to invest in new network infrastructure in the short term, they will likely have to pay more in the long term. He gives the example of Spain, which invested €2 billion in 2023 to support what it called its “already limited network”, instead of investing the approximately €1.16 billion that would be needed to expand its network.

Such examples highlight some of the other challenges associated with implementing network infrastructure, namely a lack of awareness of the problem and a reluctance to adopt potential solutions. Cremona calls on governments to “better identify and address the structural and economic causes of network underinvestment.”

“Urgently address network connection queue issues – one approach could be to move from a first-come, first-served approach to a first-come, first-served clustered approach,” suggests Cremona. “That’s exactly what the U.S. Federal Energy Regulatory Commission (FERC) did to deal with massive queues on the grid.”

Cremona is referring to FERC’s implementation of Regulation 2023-A in March this year, intended to accelerate connection-ready projects to the grid. While not enough time has passed to assess the long-term effects of this reform, a key part of the order was to place responsibility for allocating grid connections on ISOs because they have, as FERC put it, “the most complete knowledge of the transmission system.”

“There is a huge opportunity to invest in people and resources to help reduce network capacity challenges,” added Nguyen, who praised FERC’s latest reforms as a way to better assign responsibility for new connections to the grid. “We have seen positive movement following FERC’s recent efforts to increase ISO and utility accountability for streamlining interconnection processes.”

Cremona also suggests that support for “alternative network solutions” such as storage could help reduce the burden on large-scale network infrastructure. Rimshah Javed, senior business development manager at Arenko, said earlier this year Premium photovoltaic technology that there is a strong business case for co-locating solar and storage because “you know how you can monetize your assets.”

“This could include adding storage and flexibility (such as) batteries and demand response, as well as innovative networking solutions such as dynamic line loading and cable bundling.”