Insufficient Investments in Power Grids Hinder Green Transition

The energy transition and the increasing adoption of renewable energy sources (RES) require corresponding investments in power grids. This is evident in Europe, as Spain’s blackout and Northern Europe’s isolation from the rest of the continent highlight the importance of interconnections and infrastructure. The goal is to integrate more RES while ensuring system stability and fair prices for consumers. The International Energy Agency (IEA) released its annual report on global energy investments this week. Although spending on networks is expected to increase by 9% to $400 billion this year, it remains insufficient based on current needs. In 2016, $0.60 was invested in networks for every dollar spent on electricity generation. Now, that ratio has dropped below $0.40, even as international plans aim to connect RES units with a total capacity of 1,650 GW. The European electricity association Eurelectric also emphasized the importance of grid modernization, focusing on digitalization, resilience against extreme weather events, and expanding international connections. Greek Deputy Minister of Environment and Energy, Nikos Tsafos, called for a centralized European approach to network development, stressing that interconnections are essential for lower prices in Northern Europe. However, efforts face challenges such as rising costs for new electrical infrastructure. Cable prices have doubled since 2018, while transformer costs have risen by 75%. There’s also a shortage of skilled labor in their production. The IEA and European bodies point to slow project permitting processes. Meanwhile, the EU aims to improve through so-called proactive investments, which will be supported moving forward. Overall, Europe estimates needing €730 billion in distribution networks and €477 billion in transmission networks by 2040, according to the Commission.