Europe’s clean energy transition cannot happen without investment, however today too many projects are struggling to get off the ground.
According to Eurelectric’s latest position paper, Europe needs between €800 billion and €1.2 trillion in clean energy investment every year to meet its climate and electrification goals. Yet there remains an annual investment gap of up to €500 billion.
So, what is holding investors back?
Why investment is not taking off
Despite strong momentum behind electrification and decarbonisation, companies across Europe are facing growing uncertainty when deciding whether to invest.
Businesses assess projects based on what Eurelectric describes as “strain-to-gain leverage” essentially weighing debt, costs and financial risks against expected returns.
Today, that balance may be compromised by numerous risk factors.
Policy uncertainty, volatile power prices, supply chain bottlenecks, grid delays and financing risks are making clean energy investments less attractive, even when the technology is available and demand is growing.
The paradox facing Europe’s energy transition
The problem is not a lack of ambition or innovation.
In fact, many companies are ready to electrify and modern technologies are increasingly available. But the investment environment is preventing progress.
Take Power Purchase Agreements (PPAs) for example – long-term contracts that allow electricity buyers and producers to lock in prices and support renewable deployment. While PPAs should be a key enabler of the transition, many are being delayed due to credit risk concerns and financing barriers.
Without action, Europe risks slowing its clean transition at the very moment acceleration is needed most.
Power grids remain central to the transition
Investment in electricity networks is another critical challenge.
In its Grids for Speed report, Eurelectric estimates that €67 billion per year is needed for distribution grids alone until 2050 to ensure Europe’s networks can support rising electrification, renewable integration and flexibility needs.Figure 1 Grids for Speed – Eurelectric, 2024
However, lengthy permitting procedures and limited access to funding continue to delay essential grid reinforcement and expansion.
Eurelectric’s 10-point derisking agenda
To restore investor confidence and unlock private capital, Eurelectric has proposed a 10-point derisking agenda focused on both regulatory stability and targeted financing measures.
Key recommendations include:
· Maintaining the pillars of electricity markets to preserve investor certainty and predictable market signals
· Leveraging the European Investment Bank’s toolbox more effectively to support clean transition projects
· Expanding the EIB’s €500 million guarantee programme to reduce counterparty credit risk
· Enabling PPAs at scale by tackling regulatory, accounting and market barriers
· Strengthening distribution grid security and funding access
· Developing strategic supply chains to reduce bottlenecks and improve resilience
Action cannot wait until 2028
While the next EU budget cycle (2028–2034) will play an important role, Eurelectric stresses that Europe cannot afford to wait.
Immediate action is needed to strengthen the investment climate, reduce risk, and ensure private capital can flow into the projects that will power Europe’s future.
Read the full paper here: https://www.eurelectric.org/publications/a-derisking-agenda-for-investments-in-the-clean-transition-2/
This week’s edition’s written by:
Erin Kalejs, Strategic Communications, Eurelectric
With technical input from:
Edoardo Tosoni, Markets, Investments & Customers, Eurelectric
This blog post was originally published as part of Eurelectric’s LinkedIn Friday Features. Subscribe here to stay updated and never miss an edition.
Disclaimer: This article is for communication purposes only and may not reflect Eurelectric positions. Any positions taken in this article shall not be attributable to Eurelectric’s official positioning. Official Eurelectric positions are reflected only in position papers published here.