The real bottleneck is the grid While renewable generation has become increasingly competitive, the infrastructure needed to support it has largely struggled to keep pace. In many markets, the challenge is no longer about building additional wind or solar capacity, but about ensuring electricity can be transmitted, stored and managed reliably across an increasingly complex power system. The mismatch is becoming more pronounced. New solar and wind projects can often be developed in one to three years, while hyperscale data centres can become operational even faster. Major transmission projects can take five to 15 years to plan, permit and build, creating a growing mismatch between the pace of grid expansion and rapidly rising electricity demand⁵. The consequences are already being felt. More than 2,500 gigawatts of renewable generation, energy storage and projects with large electricity demand – including data centers – are currently waiting in grid connection queues worldwide, according to the IEA. At the same time, the agency estimates that annual investment in electricity grids will need to increase by around 50 percent, to about USD 600 billion per year, by 2039 if countries are to keep pace with the growing demand to support the expansion of clean energy⁶. Renewables are ready, but connection capacity is lagging Energy security is increasingly constrained by grid infrastructure, not renewable generation economics. Required USD 600 billion / year level By 2030 More than 2,500 GW Renewable generation, storage and large electricity-demand Projects waiting to connect Investment needed
T he Philippines illustrates the challenge well. The country remains heavily dependent on fossil fuel imports, leaving households and businesses exposed to swings in global energy prices even as electricity demand continues to climb alongside economic growth and urbanisation. The government has set ambitious targets to increase the share of renewables within the power mix, to 35 percent by 2030 and 50 percent by 2040, as it seeks to strengthen domestic energy security and reduce reliance on imported fuels¹. The implications extend well beyond just keeping the lights on. Reliable and affordable electricity underpins essential services ranging from cold-storage networks that reduce food waste to manufacturing, healthcare and digital infrastructure. As governments across the region position their countries to attract data centres, dependable energy systems are becoming a competitive advantage as well as a public necessity. It’s only going to become more so: the International Energy Agency says electricity demand from data centres will grow rapidly over the coming decade². That’s why energy security is no longer just a challenge of energy policy; it’s an infrastructure challenge. Meeting it will depend on attracting the long-term investment that’s needed to build resilient, affordable and future-ready energy systems.
Falling renewable costs change the equation
The investment case for renewable energy has strengthened significantly over the past decade. Declining costs for solar PV, battery storage and other clean energy technologies, alongside improved performance and reliability, have transformed renewables from an emerging technology into a mainstream infrastructure asset. According to the International Renewable Energy Agency (IRENA), 91 percent of new renewable power projects commissioned globally in 2024 generated electricity at a lower cost than the cheapest new fossil fuel alternatives, reinforcing the growing economic advantage of renewables³. Falling costs alone don’t explain why investors have become more interested in renewable infrastructure. Greater confidence in long-term asset performance, evolving electricity market reforms and the growth of corporate power purchase agreements (PPAs) have improved revenue certainty and strengthened project bankability. At the same time, domestic renewable generation is increasingly being seen as a strategic hedge against the volatility of imported fuel prices – a proposition that is especially attractive for economies, like the Philippines, that remain exposed to global oil and gas markets. But cheaper generation alone does not guarantee energy security. Building a secure, affordable and resilient electricity system requires investment far beyond solar parks and wind farms. Transmission networks, energy storage, system resilience and grid flexibility all need to evolve alongside that new generation capacity. As the IEA has warned, electricity grids are becoming the backbone, but also potentially the bottleneck, of the energy transition⁴.
Those challenges are especially acute in archipelagos like the Philippines, where electricity must be generated and delivered across thousands of islands with different demand profiles, resource availability and network constraints. Expanding transmission networks, strengthening interconnections and investing in energy storage are therefore just as important as adding more renewable generation. At the same time, policymakers face a delicate balancing act. Consumers ultimately judge energy systems by two measures – affordability and reliability – and both remain non-negotiable politically. While renewable energy will continue to play an increasingly central role, maintaining a diversified energy mix, including technologies such as natural gas and LNG, is likely to remain an important part of ensuring reliable power as the transition progresses. The objective is not simply to replace one fuel source with another, but to build an electric system that is resilient, affordable and ultimately investable.
42 | GHD | Nexus Magazine
Nexus Magazine | GHD | 43
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