The need for speed
There is no doubt that Europe’s future is electric. Electrification is at the heart of the European Green Deal and this is making waves across the Continent. Transport, heating and even industrial processes are using more and more power in final use processes. Meanwhile, we are adding staggering amounts of renewable energy – specifically wind and solar – to the energy mix every year.
While electrification ramps up at unprecedented rates, the system supporting them needs to do so in lock step to keep the pace of the transition high.
From 1990 to today, electricity demand has grown by 500 terawatt-hours (TWh) to 2,500 TWh. But in the next 30-year period, this will increase four times faster, increasing 2,000 TWh to over 4,500 TWh by 2050.
Electric vehicles (EVs) and their chargers, heat pumps and solar photovoltaics (PV) will lead this charge. Electric vehicles and heat pumps will each number approximately 250 million by 2050 – a roughly twenty-fold increase from today. Meanwhile there will be over 7 million public EV chargers, a near sixty-fold increase from today and a seven-fold increase in distribution-connected renewables projects to around 2,300 GW.
20x
EV & heat pump
8.1x
Distribution-connected RES capacity
60x
Installed EV chargers
Connecting all these electric elements to our already constrained grid will be the challenge to overcome in the next decades. Eurelectric’s President and CEO of German utility, Leonhard Birnbaum, put the scale into perspective:
“…We will probably get to the point that up to 2030, we need to make one connection every seven seconds of a working day” – this means E.ON will need to make approximately 5.7 million connections from 2024 until 2030.
While electrification is underway, there are other challenges we cannot ignore. Cyber attacks in today’s more tumultuous world are increasingly likely to take our lines offline, as are extreme weather events with the intensification of climate change. At the same time, customer expectations are also changing as is the way they interact with the grid, all this while the infrastructure ages. Today, 30% of our grids are over 40 years old, which by 2050 could reach 90%. Such developments challenge the reliability of our power system.
Investments in modernisation: digitalisation, reinforcement and expansion, are therefore crucial for an electric future.
If we do not address the challenges faced today, the grid will become a serious bottleneck, putting the electric future in jeopardy. Instead of the significant growth mentioned above, we can expect 62 million less heat pumps, 73 million less EVs and 371 GW less solar PV to be connected in Europe in 2050 than if we take investment in the grid seriously.
62 M heat pumps
not connected by 2050
73 M EV
not connected by 2050
371 GW solar pv
not connected by 2050
How do we take grid investment seriously?
Investing for speed: upping the game
To be clear, we have done well investing in our grids to date. With an average of €33 billion (bn) per year going invested in our distribution grids over the past years on average, we are at a much higher level than ten years ago and getting things done with it: connections, number of substations, expansion and digitalisation have all increased. But as electrification takes off, so too will the needed investment.
No less than a doubling of investment will be needed to keep up with a doubling of electricity consumption. That means €67 billion per year from now until 2050.
What is all this money needed for? There are several areas we need to invest in – some more costly than others, but all no-less important than the other:
Demand reinforcements
Roughly €29 bn per year to expand grid capacity and enable connections of new power demand.
Replacements and renewals
Roughly €18 bn per year to modernise cables as the ones in place age out. Remember, 90% of EU power lines will be over 40 years old by 2050.
Generation reinforcements
€8 billion a year will enable capacity expansion to connect assets to the grid. We are talking of hundreds of gigawatts of clean and renewable energy, 70% of which will connect at the voltage level.
Resilience
Our electricity cables will need to handle external events, including cyber-attacks and extreme weather events. As these issues become more prevalent, we must earmark €5 bn a year to resilience and reliability.
Smart meters
Customers can use smart meters data to adjust their demand to cheaper periods while DSOs can understand areas of the grid facing congestion and respond accordingly. This should see €4 bn a year to expand their roll-out.
Automation and digitalisation
These enable further system benefits, reducing the need for human oversight and adjusting operations to the reality on the ground in real time. This should also see €4 bn a year.
“Billions” is a lot…
…and is certainly no pocket money, but in 2023 we also spent €451 billion (source: Eurostat) – nearly 7 times more – on fossil fuel imports. And this one year after REPowerEU which was meant to cut gas consumption across the Bloc by 15%… Europe also spent 1.5 times more on its transport infrastructure – road and rail in 2021.
…but there are strategies to reduce…
We identified three strategies to lower the overall grid investment cost to €55 billion a year:
1
Anticipatory investments. Today, investing in power demand that has not yet been requested to connect is not enabled. It would however be the most cost-effective way to upgrade the grid at the speed and scale needed for our energy transition. This could reduce the overall investment figure by over €6 bn a year.
2
Asset performance excellence. These systems account for the replacement of old infrastructure and the digitalisation of the rest to improve the network functioning. With this solution, the overall financing need could drop by another €1 bn with the cost of digitalising the grid factored in.
3
Grid-friendly flexibility that enables system operators to manage congestion, again accounting for the cost of digitalisation and generation to enable this would reduce the investment figure by another €4 bn.
…and new technologies can help even more
Beyond effective strategies that lower the overall investment need, we also have technological solutions that can go even further. New solutions include:
We also collected case studies from our Business Associates with practical examples of how DSOs manage complexities of the grid.
Case studies
If your company has a solution that could be featured here, reach out to business@eurelectric.org
The payoff
Investments are never made without a payoff – so what is the Grids for Speed payoff?
Let’s go back to our fossil fuel imports. As mentioned, our figures are in line with the European Commission’s S2 scenario of the 2040 Climate Target Impact Assessment, which foresee massive electrification. This scenario also corresponds with a massive reduction in the imported fossil fuel bill in Europe – from €451 billion in 2023 to €142 billion a year from 2041-2050.
Grids for Speed enable electrification that reduces fossil fuel imports by €309 billion a year for the 2040s.
But it isn’t just economics
Grids for Speed is not simply about economic efficiency. Its about much more, including our energy security and climate action.
In December 2023, the European Environmental Agency showed that the current national energy and climate plans (NECPs) submitted by Member States put the EU on track to miss more than 30% of our 2050 net zero target. Grids for Speed enables rapid electrification that will speed up decarbonisation efforts across society and meet our climate ambition.
Electricity only makes up 23% of final energy consumed in the EU meaning a majority of Europe still runs on fossil fuels, more imported than not. This raises serious concerns for our security of supply, as we learned with the energy crisis. Grids for Speed can repatriate our energy security by enabling more homegrown clean and renewable energy deployment and energy system flexibility.
Policy recommendations
How can we capitalise on Grids for Speed? Based on the joint analysis we undertook with EY, we have arrived at five key policy areas where we can enable the financing flows for Grids for Speed.
1. Regulation
Challenges
Regulation not ready for major investment push.
Solutions
Financing costs and growing OPEX recognised regularly & competitive returns on capital.
2. Finance
Challenges
Funding, tariffs & financial tools don’t allow sufficient investment
Solutions
Easily accessible funding, financing instruments and de-risking tools.
3. Permitting
Challenges
The needs and speed required must be reflected in permitting.
Solutions
Streamline permitting with “bundled” approach (e.g. RES & grid expansion permits linked.
4. Supply chain
Challenges
More critical materials, +100% more transformers and +70% more kms of lines needed.
Solutions
Upsize EU manufacturing, diversify supply chain, shorten procurement and delivery, improve recycling.
4. Skills
Challenges
+2M jobs and skilled workforce needed.
Solutions
Create re-&-upskilling programmes & accelerate automation.
“Delivering the transition to homes and business across the EU requires doubling investments in the distribution grids. We need attractive regulation to finance, smart strategies and technologies to optimise and the economy to electrify in tandem to spread costs sustainably.”
“By harnessing real-world grid data that encompasses over 60% of the European population, we’ve achieved an unparalleled level of robustness in the investment assessment. The results highlight the importance of emerging grid strategies such as anticipatory investment, AI-driven asset performance excellence and grid-friendly flexibility to optimise investments and deliver at speed.”
“Europe’s energy evolution demands reliable grids for economic vitality. With aging infrastructure, €55-68 Bn/yr investment till 2050 is crucial. It’s not just reinforcement; it’s about resilience, smart tech, and flexibility. Our grid approach must evolve, guided by the policy insights provided in the study.”
“Distribution grids will facilitate integrating demand into the electrical system, so it is needed mechanisms that anticipate the development of the grids, integrating digitalisation into the remuneration and make the grid planning more flexible and agile.”
“Massive investment in grids is needed – most urgently in three main pillars: hardware infrastructure, software, and last but not least: People. The analysis of the societal benefits gives the study a unique added value and reminds us: investments in grids is for everybody’s benefit.”
“Grids for Speed is a comprehensive report that clearly addresses the investments and regulatory changes needed for a successful energy transition. Tomorrow’s grid depends highly on regulatory, political, and financial support.”
“To achieve a successful energy transition, EU distribution grids must be reinforced and equipped with new capabilities at a pace compatible with current energy policy targets and calendar. The Grids for Speed study provides an EU perspective on the investments required to prepare distribution grids, as well as on the technical and regulatory measures to support existing EU energy and climate policy goals.”
“Energy infrastructure is critical for all of our customers’ activities and, consequently, for our climate goals. The transition is gaining momentum, and as Eurelectric’s Grids for Speed report highlights, we need to build grids, achieve a high level of customer flexibility, and create effective policies. This is something we have to do together.”
