Aging Infrastructure Threatens the Future of European Energy
March 15, 2025
ByFelicity Bradstock– Mar 15, 2025, 10:00 AM CDT
- Europe faces a critical need to upgrade its aging electricity grid, requiring $633 billion in investments by 2030, to support renewable energy integration.
- The lack of grid capacity is delaying or halting numerous renewable energy projects, hindering Europe’s ability to achieve its climate targets.
- Solutions such as an EU independent system operator and a dedicated grid fund are being proposed to address fragmented networks and financing challenges.
As Europe’s energy demand continues to grow, the region’s transmission infrastructure is in dire need of an upgrade. There have long been concerns about investment in Europe’s grid lagging behind renewable energy investment and therefore delaying the deployment of clean power. However, recent assessments have demonstrated just how imminently grid modernisation is needed, if the region hopes to achieve its end-of-decade climate goals.
According to the International Energy Agency (IEA), at least 1,500 GW of renewable energy projects have been halted or delayed due to the lack of available grid connections. In the EU, 11 out of 26 countries are basing their grid investment decisions on plans that assume lower wind and solar capacities at the end of the decade than those outlined in national targets according to a 2024 analysis. This means that there may not be enough grid capacity to connect new wind and solar projects as governments and private companies invest heavily in the expansion of Europe’s renewable energy capacity. In terms of solar power, there could be a mismatch of around 205 GW, which is almost equivalent to the EU’s total installed solar capacity of 263 GW today.
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Several European countries are now facing the high cost involved with managing an oversaturated grid system. For example, in 2023, Spain spent more on managing its congested transmission network than it invested in grid improvement projects. However, there is some optimism as, in November 2023, the European Commission (EC) established an Action Plan to accelerate the expansion of electricity grids. The EC had already established a supportive legal framework for the rollout of electricity grids across Europe, including the revised TEN-E regulation, the revised Renewable Energy Directive, and proposals for a Net-Zero Industry Act and a reformed electricity market design.
Between 2023 and 2030, electricity consumption in the EU is expected to increase by around 60 percent. The report states that 40 percent of the EU’s distribution grids are over 40 years old and, with cross-border transmission capacity due to double by 2030, it will require $633 billion of investment to upgrade the region’s grid.
Maroš Šef?ovi?, the Executive Vice-President for European Green Deal, Interinstitutional Relations and Foresight, stated, “Grids are the backbone of our energy system. Our Action Plan will ensure better support to infrastructure planning, development and operation, central steps to connect Europe’s growing renewable energy sources to the end-users that need them – from households to hydrogen producers. Through concerted efforts, we can develop more efficient, smarter and more integrated energy infrastructure, thereby making sure that we deliver the clean energy that we need to succeed in the green transition.”
Nevertheless, Europe is facing increasing pressure to upgrade its grid at an accelerated rate to achieve its 2030 climate targets and meet the region’s growing power demand. As companies across Europe invest heavily in the expansion of the region’s renewable energy capacity, many are calling for faster and bigger transmission infrastructure projects. The CEO of the Swedish utility Vattenfall, Anna Borg, said that Europe requires both more transmission capacity to allow power to flow more easily between market areas and optimise prices and more clean electricity production. “Both from a sort of independence perspective and the security perspective, because also in the geopolitical context, there is a need to be more self-sufficient in Europe in general, Borg added.
The Brussels-based electric sector association Eurelectric said this month that Europe must modernise its ageing electricity grid and double distribution network investments to $70.5 billion in 2025 to connect new green energy projects and meet the rising power demand. Eurelectric’s Secretary General Kristian Ruby said“We are revisiting energy security because of major changes in the geopolitical landscape.” He stressed that while Europe has long benefitted from cheap imported energy, the region must “revamp [its] energy policies and get ready to compete in a more unforgiving world… We need to rethink energy security and focus on not being too dependent on anyone.”
A February Bruegel policy brief emphasises that it is more than just funding that is needed to effectively expand and upgrade Europe’s grid system. Fragmented networks across the region and unequal financing abilities across member states continue to cause delays to upgrades. The brief recommends the establishment of a European independent system operator (EU ISO) to enhance transparent information exchange and reduce regulatory bias towards capital-intensive investments and individual national interests above the European benefit. In addition, the creation of a grid fund could help overcome imperfect cost-sharing debates, which often slow projects.
There is a clear need to upgrade Europe’s transmission network as the region increases its renewable energy capacity in response to the growing demand for clean energy. Much of the region’s grid system is outdated and ill-prepared for the influx of green energy looking to be connected over the next decade. However, with several countries involved in the discussion, it makes any upgrade to the system complicated to advance. While the European Commission has made strides in simplifying the legal framework for grid modernisation and putting an action plan in place, greater efforts must be taken to rapidly advance the EU’s transmission infrastructure to help the region achieve its climate targets.
By Felicity Bradstock for Oilprice.com
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