As the world picks up its pace in pursuit of decarbonisation, the energy sector finds itself faced with an inescapable truth: technology alone is not enough, without the vision to support it. Despite a record increase in the renewable capacity installed around the world, the Paris agreements remain a distant milestone, with the way ahead blocked by regulatory bottlenecks and, in some countries, by obsolete electricity grids slowing down efforts to make connections more efficient.
In this exclusive interview for Lightbox, Francesco La Camera, Director-General of IRENA (the International Renewable Energy Agency), plots out the route ahead for the global transition. From the unrealised potential of interconnections to the strategic role of transmission system operators, La Camera analyses the barriers holding back the development of clean energy systems. The message is clear: economic competitiveness over the coming decades will no longer be a question of fossil fuels, but of capacity to move electrons at the lowest possible cost. This shift will require not just capital, but a firm political will capable of casting off the uncertainties of the past to embrace a decentralised, flexible and interconnected model.
Renewables race to reach the Paris targets. An interview with Francesco La Camera
The Director-General of IRENA analyses the trajectory of the energy transition at global level: from the increase in green generation capacity to the modernisation of the grids.
IRENA constantly emphasises the need to increase investments in renewable energy. Based on the most recent estimates, what are the complications slowing things down the most at global level?
«We’ve identified three major areas which act as stumbling blocks to the rapid development of renewables. The speed and scale of this transition — bearing in mind that installed capacity is increasing at an extraordinary rate, with annual growth of 16% — are essential not just in and of themselves, but because the ultimate goal is to create an energy system capable of withstanding climate change. Despite this incredible growth, we’re not yet on a trajectory consistent with achieving the Paris targets; in fact, the progress made so far remains insufficient in the face of the climate threat.
The first obstacle is infrastructural in nature. The old grids are capable of functioning for up to a 30-40% share of renewables. Beyond that threshold, the transmission and distribution system must reflect the daily and seasonal variability of these sources. Flexible, interconnected and balanced grids are called for. This lack of infrastructure is critical, especially in developing countries such as those in Africa, but it also affects Europe: it has not yet been possible to fully incorporate the potential of the Baltic or the North Seas into the grid, and the Iberian peninsula is not connected adequately to the rest of the continent.
The second obstacle is legal and regulatory. We need an international legislative and commercial framework that supports the spread of the components necessary for the transition, rather than hindering it; the current system remains favourable to fossil fuels because it has been designed for a centralised energy model. The market mechanism is based on marginal cost and on constant price fluctuations, which adapt poorly to renewables. Renewable sources require large initial investments but low maintenance costs; therefore, they call for long-term contracts.
Finally, there's the question of managerial and professional capacity, because a centralised system based on fossil fuels is simpler to manage than a decentralised one. Handling the complexity of the latter requires the strengthening of the bodies responsible for ensuring market functioning and the acquisition of new professional profiles. Companies often declare that they cannot invest as much as they would like due to a lack of qualified manpower. It is vital to re-skill workers and to update university courses, which to this day are still training professionals for the old system rather than for the new one».
So how can intergovernmental agencies like IRENA, along with international institutions, facilitate the transition?
«In terms of utilities, we’ve created the Net Zero Alliance, to which Terna also belongs, in order to share experiences. Along with the United Nations, we are organising meetings between the world’s leading 60-70 companies providing public utility services and the financial market, in order to create special one-stop-shops dedicated to infrastructure. Public intervention in the grids is vital to cover risks and encourage private capital to intervene more decisively.
As IRENA, we provide models and studies to optimise the energy system and improve grid efficiency. Our Energy Transition Outlooks identify technologies, solutions and policies that guide governments. Our reports on competitiveness show that installed renewable capacity has leaped from 470 GW two years ago to 582 GW last year, with an estimate of 700 GW for the current year. This reveals where the market is heading; in other words, renewables are the most competitive solution today for the production of electricity. Our studies indicate that the integration of storage and renewables will soon be cheaper than maintaining the old, coal-based plants. To facilitate financing, we’ve launched platforms like the Energy Transition Accelerator Financing Platform, which has met with success in Central Asia and Africa and is soon to reach South America. We get projects to the “bankability” stage so that our partners — the major financial institutions — can intervene with subsidised loans, equity transactions or grants».
The energy transition cannot be separated from the modernisation of transmission grids, such as the one Terna manages in Italy. Beyond production incentives, what are the most effective regulatory policies and legislative frameworks that governments can adopt to specifically support investments in grids (transmission and distribution), while simultaneously guaranteeing that they are ready to accept increasingly large proportions of intermittent renewable energy?
«Political will and clarity of vision count for a lot. One positive example is the strategy used by Nordic countries to harness the wind capacity of the North and Baltic Seas. Facilitating interconnectivity and making this capacity available in Central Europe is a specific political choice. It should be clear that there are far more rewards to be reaped from a focus on renewable sources than any other option: competitiveness over the coming decades will hinge on the capacity to move electrons and molecules at the lowest possible cost.
Uncertainties like the lingering question of nuclear power slow down the process, to the advantage of those who have committed themselves firmly to renewables, like China, India and, recently, nations in the Middle East. In Saudi Arabia, a kilowatt-hour costs around 1 cent, while for us the price is 7 or 8. If we don’t act rapidly to integrate wind power from Northern Europe and the coasts of Portugal, solar power from the Mediterranean and connections with North Africa, we will lose competitiveness. The main cause for concern regards the uncertainty generated, among other things, by America’s pro-fossil policies, which risk bringing the western world to economic defeat. The problem is not about blocking Chinese technological exports, but accelerating to reach and exceed those levels of efficiency. We have the capacity, the intelligence and the capital: what’s needed are decisive policies».
With the growth of distributed generation and the unpredictable nature of renewable sources, the resilience and security of electrical infrastructure have become priorities. What are the standards of resilience and flexibility recommended by IRENA?
«We’ve developed “green codes” and a dedicated tool kit to allow grids to work on these aspects, spreading awareness of best practices and encouraging the exchange of information. We can’t take the place of utilities, but enterprises like Terna represent positive examples that we’d like to see applied everywhere. The technology to guarantee flexibility does exist: we have hydroelectric, storage and interconnectivity. However, if we hesitate over batteries and long-term storage, others will get there before us. Moving swiftly towards clean, low-cost systems is the only option to support the economy, allowing consumers and businesses to pay less for energy and to become more competitive».
In the context of Terna’s role as a TSO and enabler of the energy transition, how can the global roadmaps and analyses produced by IRENA be translated into practical measures and synergies useful to a grid operator?
«Our studies on modelling the relationships between North Africa and Europe clearly show how a greater integration of energy systems will reduce the price of energy. For a company like Terna, exchanging information with other utilities is essential in understanding how to overcome technical problems. Terna as a company is an undisputed leader, on the cutting edge of technology, capable of building a balanced and flexible electricity system based on renewables.
However, it needs to act without hesitation. There’s a lot of bad information on the supposed unreliability of renewables, due to their variability. But gas has become variable too, since it has become impossible to keep receiving it from Russia. The difference is that renewables receive their “fuel” directly from nature, without the need for extraction. In Spain, for example, I've seen ministerial projects that use geothermal resources at depths of just 140 metres to heat and cool entire governmental complexes, replacing the old coal-based systems. Anything is possible, if there’s the will to make it happen. Europe has to move decisively: instead of focusing on nuclear, which we might only see in 2040 or 2050, we must modernise the grids and implement greater integration between the North and the South to ensure low-cost energy and competitiveness on the market».