Eurelectric: Europe’s distribution grids need to be urgently modernised

Europe’s distribution grids need to be urgently modernised to enable massive electrification of transport, heating and industry, integrate renewables and withstand more frequent extreme weather and cyber threats, warns Eurelectric.

That is according to a major new report, published on Wednesday, by the body representing the industry in Europe.

Eurelectric’s “Grids for Speed” study shows that distribution grid investments should increase from an average €33 billion to €67 billion per year from 2025 to 2050, roughly 20% of what the EU spent on fossil fuel imports in 2023.

Getting the grid up to speed will significantly reduce fossil fuel imports, create more than 2 million jobs, bring greater energy savings and deliver more reliable power supply while accelerating the decarbonisation of Europe’s economy.

Societal shifts are changing Europe’s energy system at a disruptive speed, it says.

By 2050, electricity will make up 60% of final energy use compared to 23% today, renewable capacity will have increased six-fold from 2020 with 70% of renewable generation and storage connecting at distribution level.

Connection requests are increasing faster than grid modernisation and will continue to grow as electrification of end-use sectors progresses. These developments put a strain on the grid, adds the report.

To relieve the strain, annual investments into new and modernised infrastructure, including digitalisation, should reach €67 billion from 2025 to 2050, around 0.4% of EU GDP.

The study notes that forward-looking grid strategies such as anticipatory investments, optimal asset management and grid-friendly flexibility could lower this to €55 billion per year if properly implemented.

Failure to invest would jeopardise 74% of prospective connections in key decarbonisation technologies such as electric vehicles (EVs), heat pumps and renewables.

Investing, on the contrary, will accelerate electrification and help the EU save €309 billion every year on fossil fuel imports from 2040 to 2050.

Eurelectric’s president and E.ON CEO Leonhard Birnbaum said, “For a successful energy transition the EU needs massive amounts of additional grid capacity. Investment volumes for distribution system operators needs to double.

“Whilst this will require a significant ramp up, the cost of not investing is even higher. To succeed we need attractive returns for investors to be able to finance it, technology and fast electrification to manage the distribution fees.”

Scaling grid investments requires a dual effort, he said.

The report says national authorities should implement the agreed legislation – such as anticipatory investments – while adapting the regulatory regime to support the investment surge.

This means, says the report, eliminating investments caps, fast-tracking grid permitting and procurement procedures and de-risking investments to spur private funding while opening up of public financing through EU budget.

Futureproofing the grid also depends on the supply chain’s capability to scale.

Even if the necessary investments are met, current shortages of copper, a talent deficit, extended manufacturing lead times and transformers’ costs can hamper infrastructure development.

Such bottlenecks must be addressed through strategic planning, enhanced collaboration between policymakers and industries and new training initiatives to ensure a skilled workforce.

Eurelectric calls on policymakers both at national and regional level to secure grid investments, strengthen supply chains and unleash the societal benefits of Grids for Speed.