Green Deal or Industrial Deal? Why Grids Always Matter!

2023 was the year in which energy infrastructure entered the spotlight at the European stage. Grids were identified as the missing piece in the energy transition puzzle which will urgently be needed to complete the picture of a decarbonized Europe.  

The IEA published its first report on electricity infrastructure describing core challenges and highlighting current shortcomings in grid investments and expansion. Also, last November the European Commission published its Grid Action Plan stressing similar challenges and offering solutions for the short- and medium-term that should be implemented within the next 18 months. Institutional actors such as DSO Entity, ENTSO-E and ACER were mainly assigned with the delivery of the fourteen Action Points.  

DSOs in the spotlight for the delivery of the EU’s energy and climate objectives  

Also, for the first time, the focus was on Distribution System Operators (DSOs) and Transmission System Operators (TSOs) alike, while in the past the attention in Brussels primarily focused on TSOs. Given the decentralized and local character of DSOs, they had not been the center of attention of European decision-makers in the past.  

This notion and perception gradually changed with the Green Deal and the Fit for 55 package, which foresaw massive increases in homegrown renewables, the electrification of heating/cooling and mobility. The war in Ukraine and the acceleration of EU targets in REPPowerEU quickly showed the rapid changes faced by distribution grids with some DSOs experiencing 1000% increases of requests to connect solar PV to their grid such as in Latvia (see here). It became apparent to everyone: the delivery of the EU objectives will be facilitated at the DSO level to which more than 70% of renewables will be connected and the consequences of the electrification of the heating and mobility sector are felt.  

2024 and beyond: Grids remain high on Europe’s strategic agenda  

In 2024 grids continue to be on everyone’s lips in the EU which is visible in recently published strategic documents: 

• The Belgian EU Presidency chose grids as its key energy-related priority and organized several high-level events together with Energy Commissioner, Kadri Simson. These activities culminated in the Council Conclusions on advancing sustainable electricity grid infrastructure published on 30 May.  
• The Letta report “much more than a market” underlined the fundamental role of grids for Europe’s energy resilience and industrial competitiveness. Ideas were shared regarding the reinforcement of the CEF budget, the establishment of a clean energy delivery agency to manage funding programs and serve as a one-stop shop for stakeholders as well as the development of new financial instruments like Green Bonds to attract private capital for infrastructure projects.  
• The European Roundtable of Industrialists’ publication on “Strengthening Europe’s Energy Infrastructure” refers to grids as “infrastructure imperative” and stresses the need for massive investments in national and cross-border infrastructure for power grids, hydrogen and CO₂. Recommendations for regulatory actions encompass fast-track energy infrastructure development and accelerated permitting procedures.  
• Eurelectric highlighted especially the role and challenges of DSOs in their Grids for Speed publication and revealed higher investment needs than in earlier estimations.  

Investments in energy infrastructure key for environmentalists and economists alike  

These recent publications show the relevance of a well-developed and established European grid infrastructure not only for a green, but also for a resilient and competitive Europe. Significant investments will be needed to transform the current energy system into a more decarbonized, electrified, climate and cyber-resilient one. The IEA report highlighted the stagnation of grid investments in the past entailing substantial investment gaps today. While Eurelectric speaks of investment needs of EUR 67 billion per year for the electricity distribution grid alone – an amount comparable to the investments done in the road infrastructure in 2021 amounting to EUR 64 billion -, the ERT estimates that public and private capital of EUR 800 billion will be needed by 2030 to invest in electricity, hydrogen and CO2 grids. While increased public and private funding will certainly be needed to face the investment challenge, Eurelectric’s recent study showed that emerging grid strategies, supported by the right regulatory environment, can help reduce the investment needs by 18%. Therefore, it will be crucial that the right regulatory frameworks for grids are set fast. 

The Grid Action Plan (GAP): (only) a first step in the right direction  

This demonstrates the importance of the fast delivery of the GAP which strives to set the right conditions for grids by ensuring that anticipatory investments are easier to access, regulatory frameworks are adapted toward the new situation of massive investment needs and increased uncertainty, permitting procedures are accelerated, new schemes regarding funding and financing for grids are established and shortages in supply chains are tackled. While most of these actions will have to be implemented at the national and local level, European bodies such as DSO Entity are actively supporting the delivery of the GAP; by connecting the dots between the local and European level but also by sharing good practices among members.  

However, the GAP is only a first step in providing better conditions for grids. It will be crucial that grids remain high on the EU’s strategic agenda beyond 2024 and grids mainstreaming becomes the norm. One obvious lesson from the past is: never forget about grids!  

For more information about the GAP and DSO Entity’s role, please visit the website for its most recent article DSO Entity’s website.