Thursday, June 13, 2024

Gridlock: Why Europe’s electricity infrastructure is holding back the green transition

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Earlier this month, the EU increased climate targets for the mandated share of renewable energy in total energy consumption from 32 per cent to 42.5 per cent. But, ensuring that these targets are met relies not just on developing cleaner energy. It also relies on the continent’s electricity grid – which was not built with the energy transition in mind. Currently, the grid is too small, outdated, centralised, and lacking sufficient connections. Not only does this create inefficiency and capacity issues, but it can hold back new forms of renewable energy from being connected to the grid. Improvement is urgently needed, as EU energy commissioner Kadri Simpson warned last month, “if we will not upgrade grid infrastructure very fast, we will not achieve our 2030 targets.”

Switching on

First, the European grid urgently needs modernisation. Around 40 per cent is over 40 years old, just ten years off its typical lifespan. An aging grid not only loses some electricity transmitted through it, but it cannot be connected to new sources of renewable energy, creating a bottleneck on green electricity generation in some EU member states. For example, in Poland, the grid did not have the capacity to accommodate electricity produced by solar panels, or small photovoltaic (PV) installations, several times this year. Moreover, at the current pace, the network will be unable to cope with rising electricity demand from the move to electrify transport and heating: for example, as part of its climate goals, the EU plans to increase the number of heat pumps installed from 20 million to up to 60 million in 2030.

Currently, the EU is spending around €23 billion per year on the expansion of electricity distribution networks, with approximately 141 projects regarding transmission networks underway in both the EU and in cooperation between the EU and third countries. The bloc has also planned to increase the length of transmission lines by 20 per cent and distribution grids by 6.7 per cent by 2030.

However, to sufficiently modernise and expand the grid, this is far too little. According to the federation of the European electricity industry, Eurelectric, the EU should increase its investment in grid expansion to at least €38 billion per year by 2030 to meet its climate targets, and up to €100 billion annually by 2050, if these targets are further increased. The European Commission has itself estimated that €584 billion of investment is needed by 2030, to expand both the transmission and distribution grids. The EU and its member states should therefore make a concerted effort to ensure sources of financing, which, according to the assumptions of the commission, will come partially from the EU budget, but also from national funds, the private sector, and financial institutions.

Connecting up

To future-proof these investments, the EU should not just expand the grid itself, but establish more interconnectors between member states. Interconnectors, which connect the grids of neighbouring countries, play a vital role in enhancing energy security by ensuring a country can address energy demands when domestic power generation falls short. This problem is often caused by climate factors – for example in France where high temperatures in summer 2022 caused a reduction in nuclear power generation, forcing the country to increase imports from the United Kingdom, Spain, Germany, and Belgium. This cross-border collaboration fosters resilience by enabling countries to mitigate the risks associated with potential energy supply constraints and fluctuations – an issue that will only become more frequent as climate change worsens.

Currently, Europe’s cross-border exchange capacity is expected to be at 136 GW by 2030, but the system is estimated to need between 148 and 187 GW to avoid such issues. Of the 141 existing projects on transmission networks, some concern the expansion of connections between member states. The key issue is that they are completed on time. So far, out of 50 cross-border projects between EU countries, only 5 are under construction, 15 are in permitting and 9 are in preliminary planning. As many as 21 projects are still in the under-consideration phase.Top of Form

The electricity grid expansion plan should also prioritise strengthening connectivity between EU member states and third countries. Ramping up this expansion can give the EU the opportunity to clean energy provide support to neighbouring countries in the event of emergencies and vice versa. For example, the expansion of electricity connections with the UK would provide an opportunity to increase imports of electricity produced by UK wind farms. Similarly, the expansion of electricity connections in southern Europe, including the Western Balkans, would provide opportunities to import green energy produced in third countries such as Azerbaijan or Morocco. In turn, modernising and expanding electricity connections with Ukraine or Moldova allows EU countries to strengthen the energy security of their eastern neighbours.

But, of the 38 cross-border projects implemented in cooperation between member states and third countries, only 3 are in the construction phase, 12 in permitting, four in the planning phase, and as many as 19 under consideration.

Going forward, the EU must place added emphasis on speeding-up its cross border connection projects, both within the EU and with third countries, to safeguard against shortages in domestic electricity production and increase access to renewable energy sources.

The EU must place added emphasis on speeding-up its cross border connection projects, both within the EU and with third countries, to safeguard against shortages in domestic electricity production and increase access to renewable energy sources

Expanding out

To ensure compatibility with new renewable energies, the grid expansion must also involve a change to the grid’s dominant model. Currently, much of Europe’s grid is centralised, relying on long-distance electricity transmission. Instead, it should move towards a distributed model which allows local electricity transmission. As opposed to centralised networks, distribution networks can better expand renewable energy capacity through transmitting locally produced electricity, which is often from renewable sources such as household solar PV installations. Distribution networks can also lower electricity costs for citizens: in Poland, 80 per cent of people live in smaller towns and do not necessarily need to be supplied by a more expensive centralised network. Expanding distribution networks at the expense of large transmission networks will also allow the risk of stranded assets – parts of the grid that are not used to their full capacity – to be reduced in the long term as the power system becomes increasingly decentralised.

However, according to the International Energy Agency, the distribution network capacity is currently “insufficient”. As such, investment planning should actively focus on decentralisation. Notably, when announcing the European Wind Power Action Plan this month, the commission also said that an action plan for network expansion will follow in November. This is certainly a step in the right direction, provided that it accounts for the urgent need more distribution networks.

Charging ahead

Digitalisation is an area where Brussels has properly planned its investment. According to the EU action plan, around €170 billion has been earmarked. These investments in grid modernisation and digital energy innovations would enhance system flexibility and make it compatible with a higher proportion of renewable energy. This would enable consumers to either feed surplus energy from their solar panels into the grid or use electricity stored in their electric vehicles to power their households. The EU’s recognition of the potential efficiency and cost-effectiveness of targeted funding is promising for accelerating this aspect of grid modernisation. The same forward planning should be applied to both decentralisation and interconnectors to adequately future-proof Europe’s electricity grid. In doing so, it should be reflected in the list of projects of common and mutual interest following the adoption of the revised regulation on the Trans-European Energy Networks, which the commission announced in the European Wind Power Action Plan.

Given, the EU’s increasingly ambitious climate goals and the development of renewable energy sources, there is a pressing need to expand power grids capable of receiving and distributing green energy. In doing so, the commission and member states must make sure that there is synergy between their plans and actions. This applies not only to adequate planning at the level of project parameters – so that projects serve individual countries and improve connectivity within the EU and between the EU and third countries – but also to create appropriate models of financing for the investments being implemented. Meeting this task requires commitment not only on the part of the EU, but on the part of the member states, which should urgently make the expansion of the network one of the priorities of their national energy policies. And because grid development takes years, this must begin immediately to ensure a greener European future. 

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.

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