The critical need for robust investment in power grid infrastructure has been underscored by recent electricity disruptions experienced in Spain and Portugal. In April 2025, a combination of extreme weather events and constraints on the existing transmission network led to widespread outages, impacting homes, businesses, and essential services across the Iberian Peninsula. Such incidents serve as a stark reminder that as the world increasingly relies on diverse energy sources, particularly intermittent renewables, a resilient and modern grid is paramount to ensure a stable and reliable power supply. Addressing the challenges of integrating the burgeoning renewable energy capacity, as outlined below, is not just an environmental imperative but also a crucial step in safeguarding energy security and economic stability.
Renewable power demand and capacity are both experiencing unprecedented growth. Global renewable power generation capacity amounted to ~4,500 gigawatts (GW) in 2024 and is anticipated to increase to ~6,000 GW in 2030, representing a rise from ~46% of total installed capacity in 2024 to ~62% by 2030. To effectively harness this growing supply of renewable energy, seamless integration into the power grid is crucial, yet several hurdles remain.
Electric utilities across the globe encounter two key challenges when integrating renewable energy into power grids. The first is insufficient grid capacity, and the second is grid instability, which arises from the intermittent nature of renewable energy generation and a lack of real-time network management at low voltages.
Challenges
1. Insufficient grid capacity hinders the connection of new renewable energy to the grid
As the share of renewable energy in global power generation is increasing, existing grid infrastructure capacity is facing a capacity crunch. Across the United States and Europe, over 1,000 GW of solar and 500 GW of wind power projects await grid interconnection. The consequences of capacity constraints are evident throughout the globe. As grid operators are struggling to connect new renewable energy projects, in some regions of Europe, connection times can take as long as five years for large-scale projects. Additionally, severe grid congestion in countries like the Netherlands has led to outright denials of grid connections for new energy projects.
2. Grid instability due to the intermittent nature of renewable energy
The intermittent nature of renewable energy generation, coupled with a lack of real-time network management at low voltages, presents a significant challenge to grid stability. The increasing number of distributed and intermittent power sources, such as solar and wind farms, can lead to fluctuations in voltage and frequency, impacting grid stability. For instance, the ERCOT grid in West Texas experienced repeated incidents: over 1,000 MW of solar power was unexpectedly lost in 2022, and over 300 MW in 2023, as inverters tripped offline due to overcurrent and frequency changes. This kind of instability can cause tangible consequences, such as stage 3 emergency blackouts in California in 2022, partly triggered by a severe heatwave that worsened grid stress.
Constrained grid capacity and grid instability translate into significant economic losses across the globe. For instance, in the UK, annual congestion costs exceeded ~$1.7 billion in 2024 to turn off plants that cannot deliver electricity because of grid constraints. In Germany, grid bottlenecks resulted in an estimated ~$650 million in annual compensation payments to renewable energy developers for curtailments in 2024. In California, the growth of renewable energy curtailment has increased by over 40% annually due to the inability to balance the power system.
Addressing the challenges of renewable energy integration necessitates a comprehensive and innovative approach that includes advanced grid planning, simplified connection processes, advanced grid technologies, flexibility services, and enhanced regulatory frameworks. The section below will delve into a detailed explanation of each of these key solutions, with a summarized version of the solutions and their impact shown in Exhibit 1.
The rest of this article is available to ADI Plus subscribers.
Log in or subscribe to unlock ADI Plus content >>
Have questions? We're happy to help.
About ADI Analytics
ADI is a prestigious, boutique consulting firm specializing in oil and gas, energy transition, and chemicals since 2009. We bring deep expertise in a broad range of markets where we support Fortune 500, mid-sized and early-stage companies, and investors with consulting services, research reports, and data and analytics, with the goal of delivering actionable outcomes to help our clients achieve tangible results.
We also host the ADI Forum that brings c-suite executives together for meaningful dialogue and strategic insights across the oil & gas, energy transition, and chemicals value chains. Learn more about the ADI Forum https://www.adi-analytics.com/forum/.
Subscribe to our newsletter or contact us to learn more.
