Growth in the renewable energy sector in the last decade and a lack of incentives for utilities to invest into new power transmission capabilities mean there is an increased risk of blackouts, a report said on Wednesday.
The joint report by German financial and insurance group Allianz and the Chief Risk Officer Forum said the championing of renewables in Europe had come at the price of reliability.
Aging power infrastructure means the European Union (EU) will need to make investments of between 23 billion and 28 billion euros over the next five years, the report said.
Worldwide, an investment of $13.6 trillion will be needed by 2030 to meet demand – half for transmission and distribution.
The report said that the investments were needed to avoid industrial blackouts, which can disrupt ‘just in time’ industrial supply lines.
“Even short blackouts which occur several times during a year in the U.S. sum up to an annual economic loss between $104 billion $164 billion,” the report said.
“Smart grids with metering, communication, and control technologies and new storage and transport capacities are needed to handle the growth of renewable energies,” Allianz’s Michael Bruch said.
Overcast and low wind conditions are often cited as concerns with regards to renewable energy sources like wind and solar, however a bigger problem can be when too much electricity is generated.
During strong wind conditions, German wind energy can provide up to nearly 30 gigawatt (GW) of electricity, the equivalent of 30 standard nuclear power plants.
German law prevents the grounding of excess energy and forces operators to sell renewable energy on Leipzig-based European Energy Exchange (EEX).
In times of high renewable generation and low demand, this can cause negative power prices on EEX as operators effectively pay utilities to switch off conventional power plants to prevent overloading the grid and make space for the flood of renewable power.
Half of the estimated 194 GW of new electric capacity added in 2010 came from renewable sources, and as renewables become more cost competitive, technological innovations in storing electricity – such as pumped-storage hydropower or molten salt thermal storage – are needed, the report said.
The U.S. electricity grid is 5-10 times less reliable than the European grid, with an average of nine hours of disruption each year per U.S. consumer leading to losses of least $150 billion, the report said.
(Editing by Henning Gloystein)