Investors may be underestimating the risk that renewables could become stranded assets, as grid constraints and congestion and supply chain hurdles limit the value that these assets could deliver, Barclays said in a recent white paper on “energy transition realism”.
“The classic stranded-asset story focused on fossil fuels, but what we are now seeing is stranded-like outcomes also emerging for renewables,” Daniel Hanna, Global Head of Sustainable Finance at Barclays and a contributor to the paper, told Bloomberg in an interview published on Wednesday.
Barclays sees interconnection as a critical bottleneck in the energy transition.
“Stranded-asset risk is no longer confined to one part of the system. Thermal plants can be impaired by carbon pricing, emissions standards or shifting merit-order dynamics,” the executives and analysts at Barclays wrote in the paper.
“Equally, renewables can be stranded where interconnection queues, curtailment or insufficient firming capacity impairs their ability to deliver value,” they argue.
Without sufficient build-up and investment in interconnection and transmission, clean energy assets could become increasingly vulnerable when the surrounding infrastructure is misaligned, according to the UK-based bank.
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“The binding constraints are system integration and industrial capacity. Power grids are congested. Materials supply is constrained. Permitting and construction bottlenecks are systemic,” Barclays noted.
“Firm capacity is underbuilt, and, according to the IEA’s 2025 World Energy Outlook, renewables are, in some cases, in danger of becoming stranded assets because the electricity system cannot absorb their output.”
Last month, the International Energy Agency (IEA) said in its Electricity 2026 report that the need for rapid and efficient expansion of grids is a pressing global issue. Without increased system flexibility and rapid grid expansion, the Age of Electricity could roll out slower than expected, according to the agency.
Today, global investments in grids are about $400 billion per year. If the world is to meet the expected growth in power demand through 2030, it would need to boost annual grid investment by about 50% from $400 billion, according to the IEA.
The Age of Electricity will also need “a significant scaling up of grid-related supply chains,” the IEA said.
By Tsvetana Paraskova for Oilprice.com
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