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There Is An Unsynchronized Pace Of Transition In Power Generation – Report


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Major power outages impacted at least 350 million people—more than 4% of the global population—last year as new power supply challenges have emerged on top of more traditional ones, according to a new report.


The report, entitled Are We Entering an Age of Increasing Power Supply Disruptions? notes that markets of all types are increasingly prone to major disruption. Some of the largest power supply disruptions included regions that have had relatively reliable supply (rolling blackouts and power rationing in China; Winter Storm Uri power crisis in Texas), while others inflicted further stress on markets with existing problems (nationwide blackout in Pakistan; rolling blackouts in Sri Lanka).

“While power supply challenges are not new and power supply disruptions have long plagued certain parts of the world, new challenges are emerging and exacerbating older ones.

“Lack of maintenance and chronic underinvestment in generation and grid assets in many markets around the world continues to be one of the main challenges causing power supply shortages. Add to that greater frequency of extreme weather events and the unsynchronized pace of energy transition and it increases the potential for a new age of more-frequent power supply disruption.” – Rama Zakaria, associate director, global power and renewables.

New challenges—particularly extreme weather events and the unsynchronized pace of energy transition—are adding to the risk of disruption on top of longer-standing challenges such as lack of maintenance and chronic underinvestment in generation and grid assets in many markets around the world, the report says.

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Climate-related extreme weather events:

  • Climate change can increase the difficulty of load and supply forecasting, raising the risk of power shortages and impacting wholesale power prices. The calibration and performance of grid operator models can be impacted by conditions that the weather can alter, such as increased cooling or heating demand, operating voltages, frequency levels and transmission flows.
  • Extreme weather events such as cold snaps and droughts can make power infrastructure previously not built for certain weather conditions much more susceptible to outages, making weatherizing equipment increasingly important.
  • In hydro-heavy markets such as South China and Brazil, climate change can impact hydropower supply and strain the system. In Guangdong Province, for example, soaring power demand—driven by economic growth and hot weather—and lower-than-expected hydro imports due to the drought in neighboring southwest China resulted in inadequate capacity in 2021. Brazil was also facing the worst drought in almost a century, increasing its exposure to the surging global gas prices.

“Transitions are inherently bumpy and not easy to manage. The energy transition is no exception. An unsynchronized pace of transition across different parts of the value chain can create challenges and expose energy markets to increased volatility.

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“Fossil fuel supply is still the dominant form of energy in most parts of the world. If that supply is curbed faster than demand for it declines—and before alternative technologies can fill the gap—shortfalls can arise, leading to soaring prices.” – Xizhou Zhou, vice president, and managing director, global power and renewables.

The unsynchronized pace of the energy transition across the value chain:

  • Fuel Supply and Power Generation: With the 2021 global energy crunch, tight gas and coal supply in the face of surging post-COVID-19 demand resulted in skyrocketing power prices in Europe and rolling blackouts in China. In the past, these high prices would naturally lead to more supply in gas and coal, but energy transition pressure has broken that market linkage as investors shun new investment in fossil fuel production. Meanwhile, the COVID-19 pandemic had created supply chain bottlenecks, exacerbating the situation and intensifying volatilities. Indeed, many wholesale power markets experienced major power price jumps in 2021, while intra-year volatilities increased significantly.
  • Power Generation and Transmission: In addition to fuel supply and power generation, there is also an unsynchronized pace of transition in power generation and transmission and distribution infrastructure. This is becoming increasingly the case with wind and solar resources typically located farther away from load centers. This in turn can lead to grid bottlenecks and supply curtailments, which can heighten the risk of power disruptions.
  • Increased Reliance on Intermittent Sources: The increasing share of wind and solar generation comes with increased exposure to weather patterns and new forms of variability. Today, dispatchable thermal generation is typically used to balance the variability of renewables. But as power systems decarbonize, new flexible and carbon-free firm technologies—some of which are not commercially available yet—will be needed. Power networks will also need to evolve to facilitate the integration of larger volumes of distributed generation.
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