Deep Dive: Can the entire world be on one energy grid?

I firmly believe that sustainable and green development is the greatest issue of our time. As I have outlined before, I do not have faith in multilateral agreements to bring an end to climate change. It is in my opinion the most complex issue that has ever faced economics, as actors are separated from their actions both across time and space.

A solution that is slowly gaining support throughout the world is the idea of global energy interconnection. A concrete plan for such interconnection has been laid out by the Global Energy Interconnection Development and Cooperation Organization (GEIDCO).

Part 1: What is Global Energy Interconnection (GEI)?

Global Energy Interconnection is essentially an ambitious plan to see almost the entire world on one renewable energy grid. It consists of a Smart Grid, UHV Grid and clean energy. GEI has gone beyond simply a concept, and became a plan with the formation of GEIDCO in 2016. Currently, the organization has the support of over 400 institutions, universities, banks and consulting firms that include names such as Tencent, Morgan Stanley Asia, KPMG and Accenture.

 

Part 2: Benefits of GEI

GEI has the potential to solve many issues that the world faces today and will face in the future. Global Energy Interconnection will ensure:

  • Clean, reliable and affordable energy for people in all regions of the world.
  • Pollution free cities where people can happily live with blue skies and without adverse health impacts.
  • Minimization of the global carbon footprint in order to tackle our urgent climate change problem.
  • Poor nations with abundant renewable energy resources are able to obtain economic benefits from them.
  • Electricity, a key building block for development, is available to all nations wishing to pursue green development.

Part 3: Implementation of GEI

GEI will take place in three phases in the official plan set out by GEIDCO. The first phase is domestic energy interconnection to be completed by 2020. The phase that follows is intercontinental interconnection to be completed by 2030 and the last is intercontinental energy interconnection with a estimated completion date of 2050. However, as with all infrastructure projects, I think GEIDCO’s estimated dates for completion are too ambitious by about 10-15 years. Their dates may be feasible from a purely constructional sense, however I feel that their plans have failed to accommodate for integration barriers and the politics of renewable energy.

Although GEIDCO use the phrase ‘UHV backbone grid’, GEI is far more comparable to a blood vessel system than to a skeleton. It is not the same as building a dam or skyscraper where the capacity of the dam or number of floors of the building must be predetermined. They do not require the agreement of 200 countries to start the process. Instead, as every country buys into the idea of GEI, they are able to link into the global system. For a undertaking if its magnitude, I believe GEI has the potential for immense flexibility.

In depth strategic planning is available on GEIDCO’s website.

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Part 4: Mini-grids as building blocks of GEI

Mini-grids are essentially banks of batteries that are charged using solar panels with occasional diesel support. These mini-grids have large short term potential as they operate independently of a central grid. They are especially favorable in regions where the national utility is unable to reach all the citizens, as the mini-grids provide immediate electricity with relatively high security. They also provide advantages over basic rooftop solar panels as they are capable of powering larger equipment and machinery.

It is crucial however, that international investors do not only focus on the large projects such as hydro plants, but instead also see the potential of mini-grids as building blocks of greater plans. In Morocco, mini-grids have provided energy to 99% of the rural population, and other countries soon may follow suit as recent law changes in West Africa now allow NGOs and private groups to launch decentralized projects. They key to these projects will be coordination, so that in the future they can be synchronized.

As far as I am aware, mini-grids are not part of the GEIDCO masterplan, but they should be. Many countries in Africa and Asia continue to experiment with small grids powered by renewable energy that are detached from the nation’s central grid. These mini-grids to a large extent strive to achieve the same goals as GEIDCO does, simply on a smaller scale.

According to the International Energy Agency, mini-grids could account for US$ 300 billion by 2030. As electricity is key to education and economic growth, small rural regions cannot sit and wait for ambitious plans such as GEI to reach them, because such regions would understandably be low on the priority list. However, these rural regions must construct their mini-grids, with a long-term mindset, so that in the future they can connect their mini-grids to the national grid, which ultimately should connect to an international one. This would ensure that these rural areas can have the economic benefits of exporting energy if they fall in a region from which it can be done.

I would recommend that GEIDCO and organizations constructing these mini-grids, ensure that they share a common understanding in terms of plans and technology, so that these mini-grids can in some way become building blocks of GEI, especially in more rural regions.

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Part 5: Funding GEIDCO’s mission

The total predicted cost is currently at US$ 38 trillion. This can be separated into two components. US$ 27 trillion is set aside for power generation projects and US$ 11 trillion for the connecting grids.

As first, US$38 trillion seems to be an astronomical amount. Well, that’s because it is. However, it is not the number we should be focusing on, as a significant amount of investment will made into power generation projects regardless of whether GEI happens.

The more important number is US$ 11 trillion for the connection of these projects. This is money that is required over and above the money that is dedicated to renewable energy projects.

Predictably, the goals of GEIDCO align perfectly with many global organizations which are possible sources of funding (World Bank, AIIB, AfDB, ADB, NDB). Furthermore, Liu Zhenya, the Chairman, wishes to synergies the project with the Paris Agreement and regional development strategies such as Xi Jinping’s Belt & Road initiative.

Although this global project requires immense funding, I do not believe it will be the greatest hurdle that GEI will have to overcome.

 

Part 6: Criticism of GEIDCO

There will undeniably be a wide range of criticism to such a project. Currently the most prominent areas of objection are as follows:

  • The project overemphasizes the benefits of energy interconnection.
  • The project is merely another vehicle in which China is expanding its influence on the world.
  • GEIDCO’s publications do not acknowledge the potential negative environmental effects, especially the damaging of livelihoods of indigenous people.
  • At US$4 million/km, the UHV backbone grid could potentially be the greatest waste of money the world has ever seen if the project is not seen to completion.
  • The Smart Grid creates huge electricity vulnerability if the system is susceptible to hacking.

 

Part 7: Final thoughts

Ultimately, after being extremely optimistic about the possibilities of GEI two years ago, the current political climate and tensions between the world’s superpowers makes any cooperation on a project of this scale unlikely for the foreseeable future. As happens far too often solutions for climate change are forced to take a back seat as issues such as trade wars, unemployment, immigration and nuclear testing take center stage.


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