Most advanced economies have ambitious plans to achieve net zero emissions and full power sector decarbonisation in the next decade. Their electricity demand has been rising only modestly thanks to improved energy efficiency and relatively slow economic growth, especially in energy-intensive sectors. However, electrification is the focal point of decarbonisation strategies for all sectors. While these countries already produce considerable renewable energy, including from hydro resources (when available) and variable renewables, further acceleration of renewable energy deployment will depend strongly on shorter permitting wait times, investments in grid infrastructure, and policies to increase system flexibility and electrification in the transport, buildings and industry sectors. All G7 countries are included in this cluster, in addition to several European countries with high shares of renewables. 

Possible policy priorities to consider:

Streamline permitting by simplifying rules, procedures and administrative structures. Reducing permitting wait times can accelerate renewable capacity deployment and make it easier for countries to achieve their ambitions. Countries could consider 1) implementing one-stop shops to centralise and co-ordinate planning, consent-gaining and deliberation with relevant authorities and stakeholders; 2) clearly defining response deadlines for consent through positive administrative silence; and 3) digitalising permitting procedures to enable swifter communication and co-ordination among national and regional authorities, and to foster transparency. 

Ensure adequate numbers and skill level of human resource staff. Having enough public employees with sufficient training in the relevant skills is a prerequisite for faster permitting. Countries could consider 1) allocating sufficient staff with appropriate skills to national and local administrative bodies; and 2) upskilling current employees for proficiency in new policy approaches and digital tools such as spatial planning.

Involve local communities. As renewable energy deployment accelerates, local communities often perceive its burdens (e.g. in terms of land use and visual impacts) but not necessarily the benefits. Thus, policies to encourage local community engagement and profit-sharing from renewable energy investments can significantly enhance public acceptance of new projects. Early local community engagement, including in the project-design phase, increases acceptance and reduces the risk of public opposition. Countries could consider 1) fostering citizens’ financial participation in renewable energy projects through crowdfunding or by offering investment opportunities (e.g. dedicated savings accounts to channel household investments); and 2) introducing policies that encourage the redistribution of revenues from energy sales to the most affected communities, based on transparent and objective criteria (e.g. applying a small fee on renewable energy generation to establish a fund to be used for the wider economic, environmental, social and cultural well-being of the local community). 

Invest in spatial planning to help streamline zoning and permitting. Space availability and use can be a challenge for further renewable energy expansion in countries where a large base is already installed and population density is high. These countries could consider creating a dynamic spatial planning system and collecting data from different sources among various institutions to identify go-to or no-go areas for new renewable energy installations.

Possible policy priorities to consider:

Provide a long-term schedule of regular auctions tailored to government ambitions. Well-designed, competitive renewable energy auctions are considered a successful procurement method to increase wind and solar PV capacity. Countries could consider announcing a regular schedule reflecting longterm ambitions and policy goals to help increase investment certainty and enable the development of local supply chains and skills. Decisions on auction volumes should also take corporate power purchase agreements (PPAs) activity into account.

Adapt auction designs to the new macroeconomic environment. High interest rates and elevated prices for raw materials and equipment could reduce the bankability of renewable energy projects if remuneration schemes do not reflect these costs. Countries could consider 1) choosing an appropriate ceiling price based on realistic project costs; 2) finding the right balance between the level of incentives that would increase the economic attractiveness of projects while minimising the cost implications for consumers and/or taxpayers; 3) indexing contract prices to various technology-specific macroeconomic indicators (e.g. relevant commodity prices, inflation, and interest rates for different stages of project development); and 4) closely monitoring challenges to the realisation of awarded projects, to react in a timely manner and potentially update future auction volumes. 

Possible policy priorities to consider:

Encourage investment in new transmission and distribution infrastructure, including interconnections. Countries could consider 1) further aligning and integrating transmission and distribution grid planning and investments with broad long-term planning processes including renewable energy project development phases; 2) introducing grid regulation that keeps investments aligned with rapid changes in electricity demand and supply patterns (i.e. by addressing administrative barriers, rewarding strong performance and reliability, and spurring innovation); and 3) improving regulatory risk assessments to accelerate the buildout and efficient use of grid infrastructure.

Modernise regulatory frameworks for grid management and investment. Current grid regulation in advanced economies usually focuses on minimising costs in the short term and not on maximising system-wide benefits. This approach results in underinvestment in infrastructure that is essential for security, decarbonisation and electrification. Countries could consider adopting regulatory frameworks that take a holistic and strategic view to drive the deployment of essential new grid capacity, ensuring that the necessary assets are in place and are operating efficiently when they are needed.  

Possible policy priorities to consider:

Design and accelerate the implementation of system-friendly support mechanisms for utility-scale and distributed renewable energy resources. As VRE shares in power generation mixes increase, remuneration mechanisms need to reflect the impact of wind and solar PV power plants on the overall system. Countries could consider 1) implementing generation-based types of remuneration with long-term contracts that expose generators to market price signals, giving developers market and system integration incentives and avoiding “produce-and-forget” ones; 2) rewarding innovative system-friendly solutions by introducing non-price criteria to select winners of competitive auctions; 3) removing regulatory and administrative barriers for corporate PPAs to facilitate VRE market integration; and 4) implementing real-time self-consumption models and avoiding or phasing out net metering schemes to increase the system friendliness of residential and commercial solar PV applications.  

Improve price signals for capacity and ancillary services. Remuneration for these services is often not proportional to the value they provide to the system. For instance, flexible power generation assets depend heavily on energy sales to remain profitable. Countries could consider better aligning remuneration with the value these services provide to the system and enabling price signals to drive increased provision of these services and improve the system’s operational flexibility. 

Incentivise the development of storage assets. Batteries and other storage technologies can support the integration of new VRE not only by providing storage for many hours, but also by improving grid stability and resilience. While targeted financial support is required to deploy new storage assets, these systems should also be allowed to capture revenues from all the value streams they provide to the system. Countries could consider fostering a portfolio of technologies (e.g. batteries, pumped hydro and other emerging technologies such as thermal energy-based storage), for instance by focusing on the services being procured and taking their different construction lead times into account. Additional regulatory enhancements, such as eliminating double taxation on storage (i.e. on demand when charging and on supply when discharging) could also help. 

Leverage digitalisation to enhance supply and demand-side flexibility integrating distributed renewable energy and flexibility assets. Using the appropriate digital equipment makes it possible to identify the optimal placement of distributed assets and renders them visible to system operators, allowing operators to monitor and control them in real time. It also reinforces power system security and reliability and enhances the provision of flexibility. Countries could consider ensuring that new distributed assets are equipped with digital capabilities to simplify system planning and operations, reduce costs and maximise the utilisation of renewable resources. Digital applications could also be used to pair distributed renewable energy assets with optimised electric end-use technologies, such as EVs and heat pumps, increasing overall system flexibility by also integrating demand-response mechanisms and applications.  

Possible policy priorities to consider:

Maximise the flexibility benefits of existing hydropower plants by incentivising their modernisation. Countries could consider better recognising the value of established dispatchable renewable energy installations by making it worthwhile to invest in the refurbishment and modernisation of ageing hydropower plants. For instance, loan guarantees or long-term revenue certainty could encourage hydropower modernisation and refurbishment investments. In wholesale electricity markets, trading balancing products over shorter timescales would recompense hydropower’s flexibility services more appropriately. Hydropower plants could also be awarded additional remuneration for providing inertia and fast-frequency-response services. Incentivise the repowering of ageing wind plants. Wind turbine repowering enables developers to retrofit power plants with more efficient turbines on established sites by using existing grid connections, land and infrastructure. Countries could consider 1) introducing leaner, streamlined permitting procedures for repowered wind plants, especially when the new wind turbines have the same or even fewer adverse environmental effects than the existing ones; and 2) implementing dedicated auction segments for repowered wind projects.