Building the Backbone of the Global Energy Transition: COP29’s Transmission Pledge
As COP29 drew to a close in Baku this past November, the urgent need for new transmission infrastructure to make the global energy transition a reality came into sharp focus.
Even ahead of the event Mukhtar Babayev, the president of COP29 and Minister of Ecology and Natural Resources for the Republic of Azerbaijan, had announced a series of high-profile initiatives aimed at advancing the energy transition. These include the Green Energy Zones and Corridors pledge, designed to drive investment and economic growth through infrastructure development and the establishment of transmission corridors that efficiently deliver renewable energy to demand centers. Furthermore, a landmark commitment was made to scale up global grid investment, aiming to add or refurbish over 80 million kilometers of transmission networks worldwide by 2040, a goal that underscores the scale and urgency of the task ahead.
Although not explicit in the COP29 pledges, the nature of the transmission grid and the necessity of transporting bulk power long distances across borders and doing so cost-effectively and efficiently places considerable emphasis on HVDC technology.
However, while recognizing the need for infrastructure investment is an important first step, achieving the objectives becomes far more challenging considering the demand for HVDC equipment and the growing backlog of orders.
Soaring Demand for HVDC
There are multiple drivers behind this demand growth, such as the lack of efficient power infrastructure across developing nations, together with a shifting focus towards enhancing and refurbishing existing grid networks. In addition, growing investments in grid network development are needed to drive the green energy transition. Another significant influence has appeared in the wake of the conflict in Ukraine and associated concerns over the security of energy supply. This is prompting greater cross-border interconnector development for instance.
The industry is struggling to respond. One of the three leading suppliers of HVDC cable technology, Prysmian, has not only highlighted its substantial forecasts for market growth but also the impact on its order book. Prysmian's current order backlog exceeds €9 billion.
The key challenge is whether the supply chain can meet demand for both ambitious projects currently planned as well as anticipated future requirements.
It’s clear that transmission, and HVDC in particular, is becoming a chokepoint for the clean energy transition. Unfortunately, as the IEA points out, while investments in renewables have surged, spending on grid infrastructure has remained relatively stagnant at around $300 billion per year since 2010. The Agency is clear that to meet climate targets, grid investment needs to nearly double by 2030 to over $600 billion per year.
Capacity Investment
Despite evidence of a dire capacity crunch in the making, soaring demand is nonetheless prompting investment among the major cable manufacturers. For instance, Prysmian’s CAPEX plan for 2023-2025 includes plans to invest €500m per year to support production capacity growth, including a new submarine cable plant in the USA and a new cable-laying vessel. Meanwhile, earlier this year, the European Investment Bank (EIB) and Prysmian signed a €450 million finance contract to support electricity transmission and distribution in Europe.
Another of the big three cable companies, NKT, has also declared a record order book and announced an approximately €1bn investment program to match.
Similarly, in the summer, Hitachi Energy announced plans to invest an additional $4.5 billion by 2027 to accelerate the clean energy transition in response to its $30 billion order backlog.
Evidently, the market is prompting a substantive response from the industry, but with projections for adding or refurbishing more than 80 million kilometers of transmission networks by 2040, there’s clearly a big storm on the horizon without additional actions.
Indeed, in light of the HVDC capacity crunch, some of the more ambitious projects are building new cable manufacturing capacity as part of the project.
For example, the Xlinks Morocco-UK Power Project plans to connect 11.5 GW of wind and solar capacity and battery storage in the Guelmim Oued Noun region of Morrocco directly to the UK in Devon. To do so, four 3,800 km HVDC cables will need to be developed to create two 1.8 GW dipole links. With a need for around 15,000 km of cable and recognizing this is many multiples of the entire European HVDC cable manufacturing capacity, a separate company was established purely to produce HVDC cables and invest in a state-of-the-art cable-laying vessel.
This may seem like an extreme response to supply chain constraints. But given the Xlinks project, once commissioned, will be able to supply around 8% of the UK’s electricity needs, it is also a clear reflection of the scale of the HVDC challenge and the urgency with which it must be addressed to reach net zero.
Leaders and stakeholders must not only endorse ambitious plans but must also ensure that practical measures are put in place to accelerate transmission infrastructure development. Government backing for large-scale cross-border projects and rapid investments in HVDC supply chains must become a priority. The urgency cannot be overstated: without immediate, concerted efforts, the energy transition will falter. Now is the time for action.
