OMC - Apoyar la transición a la electricidad renovable a través del comercio

Supporting the renewable electricity transition through trade UNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTIONUNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 1 CONTENTS Acknowledgements ................................................................................................... 2 Foreword ............................................................................................................... 3 Executive summary .................................................................................................... 5 Introduction ............................................................................................................ 8

A. The role of trade in renewable electricity ........................................................... 9 1.1 Overview .......................................................................................................... 10 1.2 Renewable electricity generation potential is unevenly distributed ............................................... 10 1.3 Renewable electricity supply is intermittent, demand is uneven .................................................. 10 1.4 Trading renewable electricity across borders can help balance supply and demand ............................. 12 1.5 Trading renewable electricity enables economies to exploit their comparative advantages ....................... 14 1.6 Trading renewable electricity across borders can help importing countries reach decarbonization targets ...... 16 1.7 Interconnectors create interdependence underscoring the case for a global grid ................................ 18

B. Addressing issues facing cross-border transmission of renewable electricity ........................................................................................ 21 2.1 Overview .......................................................................................................... 22 2.2 Cross-border electricity trade .................................................................................... 22 2.3 Supply disruptions and export restrictions ........................................................................ 26 2.4 Supply chain bottlenecks create opportunities to promote re-globalization ...................................... 28 2.5 Access to finance ................................................................................................. 30 2.6 Transparency on regulatory approval processes and timelines ................................................... 35 2.7 Drawing inspiration from the submarine cable network enabling the internet ..................................... 39

C. Conclusions ........................................................................................................... 43

Glossary of acronyms ................................................................................................ 46SUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE 2 ACKNOWLEDGEMENTS This co-publication of the World Meteorological Organization and the World Trade Organization was prepared under the overall guidance of Michael Roberts, Head, Aid-for-Trade Unit, Development Division, WTO, and Dr Roberta Boscolo, Influencer, Climate & Energy Leader at WMO. Hoe Lim, Director

This co-publication of the World Meteorological Organization and the World Trade Organization was prepared under the overall guidance of Michael Roberts, Head, Aid-for-Trade Unit, Development Division, WTO, and Dr Roberta Boscolo, Influencer, Climate & Energy Leader at WMO. Hoe Lim, Director of the Trade and Environment Division at the WTO, supervised the work. The lead author was Michael Roberts. At the WTO, Rousi Zhang, Edvinas Drevinskas, Daniel Ramos, Qing Yi and Abhishek Bhattacharya provided contributions. Valuable comments were also received from Marc Auboin, Mateo Ferrero, Lauro Locks, Reto Malacrida, Devin McDaniels, Jose-Antonio Monteiro, Roy Santana, Astghik Solomonyan, Erik Wijkstrom and Ankai Xu. Barbara Marcetich and Elizabeth Upton provided editorial guidance. Vishvanathan Subramaniam (Geneva Graduate Institute), Matthew Wittenstein (Chief, Energy Connectivity Section UNESCAP) and Peter Wooders (Geneva Platform for Resilient Value Chains) also provided helpful guidance. At WMO, Daniel Kull, Director Resources Mobilization and Development Partnership, Amir H. Delju, Senior Scientific Officer of the Climate Services Branch, Services Department, and Rundong Cao, Young Professional, also provided inputs. The publication was edited and reviewed by Anthony Martin at the Information and External Relations Division of the WTO. DISCLAIMER Prepared by the staffs of the World Meteorological Organization (WMO) and the World Trade Organization (WTO). For the WMO, the designations employed in WMO publications and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of WMO concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products does not imply that they are

publication do not imply the expression of any opinion whatsoever on the part of WMO concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products does not imply that they are endorsed or recommended by WMO in preference to others of a similar nature which are not mentioned or advertised. The findings, interpretations and conclusions expressed in WMO publications with named authors are those of the authors alone and do not necessarily reflect those of WMO or its Members. For the WTO, this work is published under the responsibility of the WTO Secretariat. The views expressed, and the terms and illustrations used in this publication are without prejudice to WTO members’ rights and obligations, nor intended to provide any authoritative or legal interpretation of the provisions of the WTO Agreements. The names of countries and territories used in this joint publication follow the practice of the WTO. This document, as well as any data, illustrations and maps included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Copyright © 2024, World Meteorological Organization and World Trade Organization.UNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 3 FOREWORD “By trading energy from sun, wind and water across borders, we can deliver more than enough clean energy to meet the needs of everyone on earth.” 1 One Sun Declaration, COP26 The sun shines, the wind blows, and water flows, but not in the same places or at same times across the globe. Cross-border trade in renewable electricity can help even out these spatial and temporal mismatches in supply and demand. The energy transition involves a move from fossil fuel-reliant energy generation to abundant, yet intermittent, weather-dependent power production. Cross-border trade has a key role to play in making national power grids operate efficiently while ensuring security of supply. Advanced weather, water, and climate information and services are essential for a smooth transition to renewable energy. Such information underpins

abundant, yet intermittent, weather-dependent power production. Cross-border trade has a key role to play in making national power grids operate efficiently while ensuring security of supply. Advanced weather, water, and climate information and services are essential for a smooth transition to renewable energy. Such information underpins intermittent renewable energy systems, contributing to better operations and maintenance, risk management and investment planning. Electricity trade represents a trade and development opportunity for many places with comparative advantages in solar, wind and hydropower electricity generation. It offers a path out of the current ironic reality that some of the places with the greatest clean energy potential are also locations with relatively high rates of energy poverty, low levels of economic development and limited integration into the global trading system. Trade in renewable energy would also help lower the costs of getting to net zero. By unlocking the comparative advantage of renewable power generation hotspots, cross-border renewable electricity trade can reduce the overall cost of the net zero energy transition – by up to USD 3 trillion according to one estimate. 2 Several least developed countries (LDCs) are already well-established exporters of renewable electricity, generated mainly from hydropower resources. Increased export prospects for renewable electricity promise to help galvanize more investment in generation capacity, grid upgrades, and interconnection, with positive spillovers for domestic electricity access. The latter may in turn incentivize investment in adding value to other goods and services – for instance, abundant renewable energy could be used to make green hydrogen that could in turn be used to process raw commodities. Cross-border electricity cable interconnections can help reduce greenhouse gas (GHG) emissions and support economies to meet their nationally determined fossil fuel phase-out timelines. By drawing on a greater range of renewable electricity generation sources across a broad geographic area, interconnection and trade can help make power supply more secure through diversification between different sources and locations. Just as shipping lanes, air corridors, highways and

fossil fuel phase-out timelines. By drawing on a greater range of renewable electricity generation sources across a broad geographic area, interconnection and trade can help make power supply more secure through diversification between different sources and locations. Just as shipping lanes, air corridors, highways and internet cable networks facilitate the movement of goods and services in the global economy, crossborder electricity transmission lines offer a mechanism to get renewable electricity from where it is abundant to where it is needed. The global cross-border network of cables that has been laid to build the World Wide Web underscores what is possible. Unlocking opportunities in cross-border renewable electricity trade requires action to address the backlog of interconnection projects, as well as delays in the delivery of critical components and long timeframes for project delivery. Action is also needed to upgrade climate services and to relieve supply chain bottlenecks in the goods and services needed to supply grid infrastructure, including transmission lines. The development of electricity grid connections needs cohesive international policy frameworks and the support of public and private sector capital. These frameworks should derisk capital-intensive interconnection projects and provide transparency and predictability in regulatory approval timeframes. While there is no World Trade Organization (WTO) agreement that deals specifically with energy trade, various existing WTO rules and bodies can help to address frictions and inefficiencies that delay or stall interconnector projects. And new disciplines or cooperative approaches that WTO Members may wish to pursue could be helpful to attract finance for capitalintensive renewable energy investments and liberalize trade in related environmental goods and services.SUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE 4 The World Meteorological Organization also has a powerful role to play in upgrading the climate services offered by its Members’ National Meteorological and Hydrological Services and expand the use of meteorology and hydrology to plan in advance according to where weather-related deficits or surpluses are expected, thus benefitting decisionmaking in the energy sector. This report concludes with a simple message for

offered by its Members’ National Meteorological and Hydrological Services and expand the use of meteorology and hydrology to plan in advance according to where weather-related deficits or surpluses are expected, thus benefitting decisionmaking in the energy sector. This report concludes with a simple message for policymakers: the energy transition creates new opportunities to expand trade in renewable electricity and to promote re-globalization. By leveraging renewable energy resource endowments, we can help promote a just transition. Let’s work together to seize these opportunities. Signatures of representatives of the two organizations

WMO WTOUNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION

5 EXECUTIVE SUMMARY This co-publication of the World Meteorological Organization (WMO) and the World Trade Organization (WTO) focuses on a core aspect of international trade: ensuring security of supply. This role is increasingly important in the context of the transition to renewable energy, which is central to mitigating the effects of climate change. As energy systems transition away from reliance on fossil fuels, the share of electricity in global energy production will grow along with weather-dependent renewable energy. Natural energy sources, notably solar, wind and water – the main focus of this report – are abundant but they are not evenly distributed worldwide. Additionally, many different meteorological factors have an impact on power generation and energy demand. The transmission of power across borders from renewable electricity sources can help address the mismatches between electricity supply and demand. It can supplement storage solutions, such as batteries, and contribute to security of energy supply. It can also unlock a range of other benefits: better grid utilization of renewable electricity, reduced need for electricity storage and new trade opportunities. Some least developed countries (LDCs) are already realizing these opportunities while others need support to do so. Moreover, trading renewable energy across borders helps economies meet their decarbonization commitments. Situating renewable energy generation

of renewable electricity, reduced need for electricity storage and new trade opportunities. Some least developed countries (LDCs) are already realizing these opportunities while others need support to do so. Moreover, trading renewable energy across borders helps economies meet their decarbonization commitments. Situating renewable energy generation in locations with the most favourable resource endowments and using grid interconnection to benefit from these comparative advantages reduces the overall cost of the global energy transition. Trading renewable electricity across borders can reduce the overall cost of the net zero energy transition – by up to USD 3 trillion according to one estimate. 3 The shared value created by the connection cables is akin to that created by the cable infrastructure underpinning the World Wide Web. Global electricity trade has grown in nominal terms by USD 99.8 billion since 2003, with 64% of that expansion occurring since 2013. Yet cross-border electricity trade remains low in value (USD 132 billion in 2023, according to UN Comtrade statistics) and far below its potential when compared to the growth of renewable energy needed to meet Paris Agreement climate targets. International electricity trade, measured by gross imports in each country, was 2.8 per cent of the 809 TWh supplied in electricity globally in 2021. 4 Realizing trade’s full potential means addressing the various factors stalling progress in this area. One is to address the bottlenecks in the supply chains of goods and services needed for grid and interconnection expansion. In turn, this would unlock opportunities for developing economies and LDCs to participate more fully in manufacturing value chains. Enabling both the flow of electricity and grid infrastructure goods and services in the most cost-effective manner across borders would help unlock growth opportunities and reduce transition costs. Several other steps could boost progress. Interconnector projects are capital-intensive and require large up-front investment before revenues start to flow. International investment in renewable energy has nearly tripled since the adoption of the Paris

services in the most cost-effective manner across borders would help unlock growth opportunities and reduce transition costs. Several other steps could boost progress. Interconnector projects are capital-intensive and require large up-front investment before revenues start to flow. International investment in renewable energy has nearly tripled since the adoption of the Paris Agreement in 2015. However, much of this growth has been concentrated in developed countries, with most developing economies left behind. 5 Developing economies presently receive less than one-fifth of global clean energy investments. Ensuring that both grid operators and suppliers can reliably access sustainable trade finance and climate finance would help to tackle this critical bottleneck. Rolling out a new wind or solar project can take between one to five years, but new transmission and distribution networks often take 10 to 15 years to plan, obtain permissions and complete. Improving the predictability of regulatory processes is another important step given the multi-jurisdictional nature of projects – involving approvals, export restrictions, tariffs and transit issues. This report discusses how WTO rules and bodies dealing with these issues in areas such as telecoms, information technologies and government procurement can be relevant for renewable energy.SUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE 6 ENDNOTES 1 Green Grids Initiative – One Sun One World One Grid (2021), “One Sun Declaration” Glasgow, UN Climate Change Conference (COP26) at the SEC – Glasgow 2021 (nationalarchives.gov.uk). 2 Transition Zero (2023), “ Cables to change the world November 2023 The benefits of transmission to decarbonise global electricity supply ”, London. 3 Aman Majid, Abhishek Shivakumar, Maarten Brinkerink, Thomas Kouroughli, Matt Gray, Isabella Suarez, Trevor Barnes and Handriyanti Diah Puspitarini (2023), “Cables to Change the World”, Transitionzero.org. 4 IEA (2020), Global Overview Trade; Electricity Market Report 2020, IEA, Paris.

Kouroughli, Matt Gray, Isabella Suarez, Trevor Barnes and Handriyanti Diah Puspitarini (2023), “Cables to Change the World”, Transitionzero.org. 4 IEA (2020), Global Overview Trade; Electricity Market Report 2020, IEA, Paris. 5 UNCTAD, World Investment Report 2023. https://unctad.org/ system/files/official-document/wir2023_overview_en.pdf.SUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE 8 INTRODUCTION This joint WMO-WTO report has been issued in conjunction with the COP29 Presidency Initiatives to Focus Global Attention and Accelerate Climate Action, notably those concerning Pledges on Green Energy Zones and Corridors and Global Energy Storage and Grids. The report has three main sections: • Section A, drafted by the WMO, outlines how endowments of solar, water and wind resources differ worldwide. The section examines how this range of endowments underlines the potential for trade to help buttress security of energy supply by matching renewable energy supply with demand. In turn, this can help unlock new export opportunities for developing economies, and in particular LDCs, that have comparative advantage in renewable energy. • Section B, drafted by the WTO, examines why interconnector projects are difficult to initiate and frequently stall. After surveying electricity trade patterns, the report identifies the factors delaying project implementation and where the multilateral trading system may be able to ease bottlenecks to ensure greater cross-border transmission of renewable electricity. • Section C, drafted jointly by WMO and the WTO, concludes with a call to work together to ease the transition to weather-dependent electricity generation systems in an efficient and timely manner in line with the Paris Agreement timelines.UNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 9 The role of trade in renewable electricity

ASUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE

10 1.1 Overview

generation systems in an efficient and timely manner in line with the Paris Agreement timelines.UNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 9 The role of trade in renewable electricity

ASUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE

10 1.1 Overview The transition to renewable energy is central to achieving both the UN 2030 Agenda for Sustainable Development and the Paris Agreement on climate change. Energy accounts for more than three-quarters of total greenhouse gas (GHG) emissions globally. 1 The global energy system is moving increasingly towards renewable energy sources, but the speed and geographic scope of the transition needs to accelerate and expand. Developing economies presently receive less than one-fifth of global clean energy investments. Concerted action is needed therefore if the world is to stay within Paris Agreement climate targets and reach net zero by 2050, whereby the amount of GHG produced is balanced by the amount removed from the atmosphere. The COP28 climate change conference in the United Arab Emirates in December 2023 called for a tripling of renewable energy capacity and a doubling of energy efficiency by 2030 to limit global warming to 1.5°C. Energy efficiency and renewable energy are the main pillars of the energy transition. Together, they can provide over 90 per cent of the energy-related CO2 emission reductions that are required, using technologies that are safe, reliable, affordable and widely available, to meet Paris Agreement targets. 2 A decarbonized power sector, with renewable sources at its core, is central to the transition to a sustainable energy future. To achieve net zero, the share of renewable energy in the power sector has the potential to reach 85 per cent by 2050, mostly through growth in solar and wind power generation. 3 However, wind, water and solar resources, the focus of this report, are not equally distributed worldwide. National endowments differ considerably in terms of renewable energy sources and vary by season and by the day. Energy demand is similarly prone to

in solar and wind power generation. 3 However, wind, water and solar resources, the focus of this report, are not equally distributed worldwide. National endowments differ considerably in terms of renewable energy sources and vary by season and by the day. Energy demand is similarly prone to fluctuations. Trading renewable electricity across borders can support the transition to weather-dependent power generation systems, addressing intermittency of renewable energy supply and mismatches between electricity supply and demand. Currently, global crossborder electricity trade is valued at USD 132 billion in 2023 by UN Comtrade statistics, but has the potential to grow much higher. Expanding interconnections would improve grid renewable energy usage, complement storage options and offer new trade opportunities, including for LDCs. Trading renewable energy across borders also helps importing economies meet their decarbonization commitments and lessens the overall cost of the global energy transition. Furthermore, since electricity can flow in both directions, the shared value created could eventually lead to the establishment of a global green grid akin to the World Wide Web. 1.2 Renewable electricity generation potential is unevenly distributed “More energy from the sun falls on the earth in one hour than is used by everyone in the world in one year.” 4 The potential of renewable electricity is vast, but the uneven distribution of renewable energy resources across the world is an inherent challenge. Renewable energy resources are abundant in some regions but scarcer in others. For example, solar energy is plentiful in desert areas but limited in northern latitudes – see Figure A.1. 5 Hydropower resources are abundant at the tropics, but wind speeds are lower than at other latitudes – see Figure A.2 and Figure A.3. 67 1.3 Renewable electricity supply is intermittent, demand is uneven Energy generation from water, wind and solar sources is, by its nature, intermittent. This intermittency stems from fluctuations in the natural resources driving power generation, causing variability on a daily and seasonal

1.3 Renewable electricity supply is intermittent, demand is uneven Energy generation from water, wind and solar sources is, by its nature, intermittent. This intermittency stems from fluctuations in the natural resources driving power generation, causing variability on a daily and seasonal basis. Factors related to climate change also lead to variability (see Box A.1). • Daily fluctuations are most apparent in solar power, where generation peaks obviously during sunlight hours and drops to zero overnight. Wind power, while less predictable, also experiences daily variations due to changes in wind speeds, influencing output. • Seasonal fluctuations are also evident. Solar generation is typically higher in summer months due to longer days and more direct sunlight. Conversely, wind patterns can shift with the seasons, leading to periods of higher or lower wind resource availability at different times of the year. Hydropower generation is also influenced by seasonal precipitation and snowmelt patterns.UNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 11 Figure A.1: Map of global photovoltaic power potential Source: World Bank Group, Energy Sector Management Assistance Program (ESMAP) and Solargis. Figure A.2: Map of global mean wind speeds 6

Source: World Bank Group, ESMAP, DTU wind energy and Vortex. • Climate change related factors are also a cause of variability in power generation. Prolonged droughts can affect hydropower generation, while shifts in wind patterns due to climate change can have a major impact on wind energy output.SUPPORTING THE RENEWABLE ELECTRICITY TRANSITION THROUGH TRADE

12 Figure A.3: Map of global hydropower potential 7

Source: Hoes OAC, Meijer LJJ, van der Ent RJ, van de Giesen NC (2017).

Box A.1: Impact of climate factors on the energy sector The first attempt to identify global climatic factors affecting renewable energy potential was published jointly by the WMO and the International Renewable Energy Agency (IRENA) in 2023. It compares data from 2022

Box A.1: Impact of climate factors on the energy sector The first attempt to identify global climatic factors affecting renewable energy potential was published jointly by the WMO and the International Renewable Energy Agency (IRENA) in 2023. It compares data from 2022 to a 30-year average (1991-2020) to assess how climate variability and change have has impacted specific energy technologies and demand. The report specifically examines wind and solar power efficiency, hydropower and energy demand, focusing on the observed changes between the long-term averages and conditions in 2022. The results underscore the impact of climate variability and change on various energy technologies. They show significant fluctuations in wind and hydropower usage, while solar photovoltaic (PV) remains relatively stable. The report stresses the need for better understanding and integration of climate factors into energy planning and management, particularly for optimizing renewable energy deployment in developing regions such as Africa.

Source: WMO. 8

Electricity consumption is also influenced by daily, seasonal and climate-related factors. • Daily variations: in renewable energy demand are linked to typical consumption patterns. Higher demand coincides with peak residential and commercial use. • Seasonal variations: Demand for energy is influenced by cold, heat, precipitation and other factors, such as public holidays or religious festivals. • Climate-related events: Heatwaves can lead to a surge in electricity consumption by cooling systems. During periods of extreme cold, demand for heating can strain energy supplies, particularly in regions dependent on electric-heated systems. Renewable energy production often does not align with peak demand times. Solar power, for instance, peaks at midday but demand may be highest in the evening. Wind energy, on the other hand, may be more available at night when demand is lower. 1.4 Trading renewable electricity across borders can help balance supply and demand When one economy has excess wind or solar power, this surplus can be exported to an economyUNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 13

available at night when demand is lower. 1.4 Trading renewable electricity across borders can help balance supply and demand When one economy has excess wind or solar power, this surplus can be exported to an economyUNLOCKING RE-GLOBALIZATION OPPORTUNITIES VIA INTERCONNECTION 13 experiencing higher demand or lower generation. Ensuring security of energy supply between surplus and deficit economies is one of the most fundamental roles of trade. Hence, trading renewable electricity across borders can help address intermittency of supply and demand variability. Integration of renewable energy into existing power systems is a major challenge for electricity grid operators. Networks were typically designed for consistent volumes of electricity based on predictable power generation. These systems were not built to handle new supply connections or variability in energy generation, which requires active management. Increasing the share of intermittent electricity – from solar and wind – into electricity grids requires increases in grid capacity, grid control, flexibility and storage. One technique used to manage the inte