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Supply chain bottlenecks threaten grid expansion
Efforts to expand and modernise electricity transmission grids around the world face mounting challenges as supply chain bottlenecks intensify, according to a new International Energy Agency report, Building the future transmission grid: strategies to navigate supply chain challenges
Prices and procurement times for essential components like power transformers and cables have almost doubled in four years, according to the IEA report, creating significant hurdles for grid developers.
The supply chain challenges facing the sector come as the world moves towards what the IEA calls “the Age of Electricity”, with global power consumption set to increase strongly in the years ahead.
While permitting remains the primary cause of delays in transmission projects, the IEA notes, particularly in advanced economies, supply chain issues have also emerged as a critical limitation. An IEA survey of industry leaders found that procurement now takes two to three years for cables and up to four years for large power transformers – twice as long as in 2021. Specialised components face even longer delays, with lead times for DC cables extending beyond five years. The price increases for components are equally concerning, says the IEA. In real terms, cable costs have nearly doubled since 2019 while power transformer prices have increased by around 75%. Underlying materials like copper, aluminium and grain oriented electrical steel have also experienced price increases. Competing demand from grid expansion projects that are underway simultaneously across multiple regions is exacerbating the bottlenecks. The increased development of offshore wind power projects has further increased demand for specialised high-voltage subsea cables, putting additional pressure on already strained supply chains. The report shows that manufacturers are responding with plans and investments to increase production capacity, but these
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2024-40 APS 0.5 TW NZE 2024-2040 IEA. CC BY 4.0
Average annual capacity additions and replacement by region for the IEA’s ‘Announced Pledges’ (APS) and ‘Net Zero Emissions by 2050’ (NZE) scenarios, 2023-2040. Source: IEA report, Building the future transmission grid: strategies to navigate supply chain challenges
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Power transformer and cable price index, 2018-2024. Source: IEA report, Building the future transmission grid: strategies to navigate supply chain challenges
expansions will take time to implement, and uncertainty remains regarding future demand levels and the availability of skilled workers. The report finds that around 8 million people worldwide are currently employed in constructing, maintaining and operating grids, and this workforce will need to grow by at least 1.5 million by 2030 to meet projected demand. Supply chain constraints come at a particularly challenging time, with more than 1600 GW of solar and wind projects at the advanced development stage awaiting grid connections. At the household level, connections to the grid have picked up in recent years, but 750 million people remain without access to electricity around the world – 80% of which are in sub-Saharan Africa. More than one-third of the global transmission grid expansion over the last decade took place
Transformers
in China. China constructed more than 500 000 km of lines, including ultra-high-voltage (UHV) connections that link renewable energy-rich northern and western provinces to eastern demand centres. Over the same period, India added nearly 180 000 km of transmission lines, a 70% increase, and Brazil expanded its grid by more than 100 000 km, a 50% expansion. In 2023, China invested around USD 40 billion in high-voltage transmission and remains committed to expanding its ultra-high-voltage (UHV) network under the 14th Five-Year Plan, with 38 UHV lines already operational in 2024. Advanced economies have seen a more gradual expansion of their transmission networks, with a 9% increase in the past decade, about 130 000 km of new lines.
This reflects the relative maturity of electricity markets and infrastructure in these economies, along with higher population densities in countries such as Japan and Korea that reduce the need for extensive grid expansion. This also means that the average age of grid infrastructure in advanced economies is higher than in EMDE (= Emerging Market and Developing Economies other than China).
As a result of these differences, there is a greater emphasis in advanced economies on the replacement and modernisation of ageing transmission lines to ensure reliability, to accommodate digital solutions, and to integrate renewable energy sources effectively. Meanwhile, investment strategies in EMDE are more focused on expanding transmission networks to meet growing electricity demand and to ensure access. The report notes that while global investment in power transmission grew by 10% in 2023 to
2024 IEA. Licence: CC BY 4.0
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Advanced economies
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Price index (2018 USD)
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