The cost of inaction: Grid flexibility for a resilient, equitable digital energy future

Investing in grid flexibility ensures future generations will reap the benefits of a cleaner and more resilient energy system. Image: Getty Images
Andreas Schierenbeck
Senior Vice President and Executive Officer, Hitachi Ltd, and CEO of Hitachi Energy, Hitachi Ltd- Investing in grid flexibility ensures future generations will reap the benefits of a cleaner and more resilient energy system.
- An investment of about $21 trillion in grid upgrades by 2050 is required to achieve a net-zero trajectory for the world.
- It is essential to accelerate the growth of the grid, enhance its flexibility and affordability, expand storage capacity, and reform rules that hinder effective planning.
The global energy transition hinges on a significant transformation of our power grids. Much like the shift from analogue telephony to the internet, the power grid of the future will be dynamic, digital and decentralized. Grid flexibility – the ability to adapt to fluctuating demands and supply in real time – is at the heart of this evolution, enabling the economic and societal benefits of electrification and renewable energy.
We know the cost of inaction: the Potsdam Institute for Climate Impact Research (PIK) estimates that annual economic damage from climate impacts could cost about $38 trillion by 2050. The longer we wait, the greater the damage, but also the larger the opportunity cost of missing out on growth. It’s why the world pledged to triple the deployment of renewables by 2030 at COP28. But IRENA found that countries are only on track to deliver half of that pledge, and calls for stronger policies, easier permitting and modernizing power grids.
At COP29, Utilities for Net Zero Alliance (UNEZA) and 45 of the world’s leading utilities and power sector suppliers reinforced an investment of more than $117 billion that will go into grid infrastructure, increase storage capacity six-fold by 2030 and add/refurbish 80 million of grids by 2040.
We must navigate the increasing demand for electrification while continuing decarbonization. The case for investing in flexible, modern grids to deliver on those goals has never been stronger. Grid flexibility maximizes renewable energy integration, stabilizes energy costs, drives economic growth, and guards against the risks of climate-related disruptions.
An investment of about $21 trillion in grid upgrades by 2050 is required to achieve a net-zero trajectory for the world, according to BloombergNEF (BNEF). The investment is huge, but it needs to be compared with the cost of doing nothing: around $38 trillion annually in 2050.
The case for immediate action: avoiding economic losses, unlocking efficiency
Outdated grid systems are a bottleneck for the energy transition, wasting billions annually. In four European markets alone, BloombergNEF estimates nearly 2.2 terawatts of wind, solar and battery storage capacity are waiting to be connected.
Because renewable capacity deployments have dramatically outpaced grid investments and system integration measures, the International Energy Agency (IEA) has noted that curtailments of renewable electricity generation are reaching 10% in several countries. Those costs of curtailment are ultimately passed on to consumers, which means the benefits of lower-cost electricity reaching their bills are being delayed. Passing on those benefits faster is a political, economic and social imperative.
The solutions are clear: we need to move much faster to grow the grid, use the most modern technologies to make them flexible and affordable, dramatically increase energy storage, and reform rules that penalize planning for the future.
Recognizing that we need to grow the grid faster is one thing. We also need to adopt multiple technologies to ensure we adapt and make the future energy system more resilient. Advanced technologies such as small modular reactors (SMR) can complement renewable energy sources to provide a stable, zero-emission power source.
Energy storage further enhances flexibility, balances supply and demand, and ensures grid stability and resilience. By smoothing energy flows and avoiding congestion, storage minimizes reliance on costly backup generation. The entire energy system – from generation, transmission and distribution to demand and storage – must become more flexible. Digital technologies, combined with power electronics, are key to managing these increased levels of complexity and variability.
Electricity needs to be abundant and affordable
Grid flexibility directly translates into lower energy costs for consumers. By optimizing the use of existing infrastructure and reducing curtailments, modern grids stabilize electricity prices. For example, the introduction of capacity-based tariffs in Belgium resulted in an 8.3% improvement in grid efficiency.
Electrification is expected to triple electricity demand by mid-century, driven by electric vehicles, heat pumps and industrial decarbonization. And AI is driving up power demand by 160%. In the US alone, data centres make up 2-4% of demand, and up to 10% in some states. Without flexible grids, this growth could overwhelm existing infrastructure, leading to higher costs and increased emissions.
Modernized grids ensure that energy supply keeps pace with demand, leveraging distributed energy resources like rooftop solar and community batteries. These systems reduce reliance on fossil fuels during peak periods, lower energy costs and improve reliability.
Reducing the costs of climate-driven disruptions
Extreme weather events are increasingly common, with climate-related disruptions costing the global economy billions annually. Flexible grids, equipped with real-time monitoring and predictive analytics, enhance resilience by allowing operators to adjust energy flows during crises.
For example, the Italian energy regulator ARERA prioritizes grid investments to increase resilience to extreme weather events. These projects must demonstrate positive cost-benefit outcomes beyond a strictly financial return-on-investment approach.
Advancing equity and access
Flexible grids also address energy inequities by enabling decentralized energy systems. In emerging markets, microgrids and distributed storage bring reliable electricity to underserved communities, driving GDP growth and improving quality of life.
Investments in grid modernization benefit all stakeholders, from large industrial consumers to individual households. The adoption of equitable tariff structures, like Belgium’s capacity-based pricing, ensures affordability while encouraging efficient energy use.
What's the World Economic Forum doing about the transition to clean energy?
Why grid flexibility matters now
The shift to a flexible, modern grid is not just about meeting energy demands – it is a strategic investment in economic growth, climate resilience and global equity. By leveraging technologies that enhance grid flexibility, nations can unlock the full potential of renewable energy, stabilize costs and build a more sustainable future.
As governments and businesses commit to ambitious climate targets, grid modernization must remain a priority. The future is dynamic, digital and decentralized. Investing in grid flexibility today ensures that future generations will reap the economic and environmental benefits of a cleaner, more resilient energy system.
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