Power market reform is key to renewable energy transition, say experts at COP27

Amid calls for a faster transition from fossil fuels to renewable energy, experts discuss key power sector reforms needed for a rapid renewable uptake

November 16, 2022 – As climate change talks ramp up at the COP27 climate summit, global power sector experts gathered to discuss how to reform the power sector to accommodate renewable energy at the “Redefining the energy sector for a clean, secure and just transition for all” event held by Solutions for Our Climate, Pembina Institute, Carbon Tracker, and the Global Wind Energy Council.

Globally, renewable energy capacity increased by 6% in 2021, driven by China and the European Union. According to the International Renewable Energy Agency (IRENA), renewable energy is the cheapest source of power today. Meanwhile, several nations across the world, such as South Korea, are falling behind in renewable energy deployment.

Experts point to the issue of bureaucratic and monopolistic power market governance, including Joojin Kim, the Executive Director of Seoul-based Solutions for Our Climate: “South Africa, Mexico, Japan, and Korea all have similar problems, where generation and network (transmission and distribution) assets are connected. If the same company controlling the grid and pricing also has legacy fossil assets, the result is pretty much the same – a carbon lock-in.” Kim raised the
point that if companies such as Samsung Electronics set 100% renewable targets in Korea, its national utility may have to get rid of its legacy fossil assets.

In particular, John Murton, UK Government’s COP26 Envoy, highlighted the importance of power market reform in South Africa in delivering a successful Just Energy Transition Partnership (JET-P): “It rapidly became clear that it made much more sense to work on reforming the South African electricity market so that you
could fund your new renewable projects through private sector investment and conserve that concessionary capital for dealing with the obstacles to a just energy transition in South Africa.”

“Because what they found in South Africa is, the transition to low-carbon generation makes perfect economic sense, but there is a considerable political set of issues to manage, such as supporting communities affected through that transition, to gain political license and make the change happen.”

Ben Backwell, the CEO of Global Wind Energy Council, also noted that the world needs to streamline bureaucracy to quadruple wind energy capacity to meet the global 8 TW target by 2050: “The question for me is that everything takes too long. There are onshore wind farms stuck in the development pipeline for decades. Simply, everything is delayed or held up by bureaucracy. With business as usual, we’re not going to get to our targets. We’re in a climate emergency here, and we need simple offtake schemes where everyone can come forward with their projects.”

In addition, David Wright, Group Chief Engineer at National Grid commented that the power market needs to prioritise grid flexibility to decarbonise electricity: “Fundamentally, our vision of flexibility is no longer dispatching the generation to meet the demand but dispatching the demand to meet the availability of green electrons when available.”

“To do this, you need to invest in smart meters, electric vehicles, batteries and heat pumps. But you also need to have a power market which doesn’t set the price of electricity based on the price of the fossil fuel generator but have a wholesale market which is based on the price of flexibility. If you change the market, the technology
and the solutions are there.”

ENDS.

Solutions for Our Climate (SFOC) is a South Korea-based group that advocates for stronger climate change policies and transition towards a fossil-free society. SFOC is led by legal, economic, financial, and environmental experts with experience in energy and climate policy and works closely with policymakers.

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