Investment in electrification is being held back by grid bottlenecks, high electricity costs and policy uncertainty, according to a new policy brief by the World Business Council for Sustainable Development (WBCSD).
The brief, Closing the Electrification Gap: Six Priority Actions to Unlock Investment, found that electrification across industry, transport and buildings has remained ‘slow and uneven’ since 2019, despite rapid growth in clean power generation.
Electricity currently meets just over a fifth (21%) of global final energy demand, with the COP31 presidency recently setting a target of 35% by 2035.
According to the WBCSD, this would require the current rate of electrification to more than quadruple over the coming years – and will mean that additional renewable generation will need to be met with improved access to electrification for businesses.
As it noted, around 2.5 TW of generation capacity, the equivalent to almost half of the world’s current renewable power, is currently waiting in transmission connection queues.
‘An electrification race’
“The global economy has entered an electrification race,” commented Peter Bakker, president and CEO, WBCSD. “Businesses want to invest, but they need affordable electricity, reliable access to the grid and confidence in the direction of policy.
“Governments don’t need another decade of targets; they need to remove the practical barriers stopping investment today.”
Focus areas
The policy brief identifies six focus areas for governments and regulators, including reforming grid connection queues; removing distortions on electricity costs; increased incentives for storage and flexibility; the development of enabling infrastructure; the need to ‘bridge the electric premium by aligning public procurement with product standards that pulls manufacturing costs down; and the provision of loan guarantees, blended finance and PPAs to provide price certainty.
“Building more clean power remains critical but is increasingly only part of the solution,” added Diane Holdorf, executive vice president, WBCSD.
“If renewable energy can’t flow through the grid, if businesses can’t connect to that renewable energy via their grid access, or electricity remains less affordable than gas, electrification can’t accelerate. Governments have practical policy and investment levers they can pull now to connect the growing clean-power supply with demand across industry, transport and buildings.” Read more here.
