A landmark study conducted recently by industry bodies Eurelectric and E.DSO reveals a need to ramp up European grid investments by 50% to 70% in the 2020s compared to the previous decade.
A first of its kind, the study — which was carried out by Monitor Deloitte on the basis of detailed empirical data from 10 European countries — concluded that European distribution grids will need investments of 375 to 425 billion euros (US$454.7 to US$515.3 billion) until 2030. The study also highlights a range of societal benefits that come with timely modernization of the continent’s electric infrastructure.
Distribution grids are the backbone of the digital and energy transition, as they ensure a continuous and reliable electricity flow, integrate the majority of renewable energy sources, and enable the creation of new services for consumers. But they need to be fit-for-purpose in an increasingly decarbonized, decentralized, and digitalized power system.
Key investment drivers
A significant part of the investment needs is driven by the ongoing energy transition — expansions and replacements related to integration of variable renewables such as solar and wind, 70% of which will be connected at distribution level, as well as to the progressive electrification of industry, transport, and buildings.
The single biggest investment driver, however, is modernization of the infrastructure because of aging. The study finds that approximately one-third of the EU’s grids is already more than 40 years old. This share is likely to surpass 50% by 2030.
Limited price impact, societal benefits
Despite average annual investment needs of 34 to 39 billion euros (US$41.2 to US$47.3 billion), representing a 50% to 70% increase of the amount spent in 2019, the impact on electricity prices and grid tariffs is likely to be moderate if policy makers and regulators provide the right framework conditions and a smart tariff design.
Moreover, the societal benefits in relation to sustainability, economy, and competitiveness brought about by this transformation will outweigh the economic impacts. The EU could save more than 175 billion euros (US$212.2 billion) in fossil fuel imports annually and, ultimately, reduce the average electricity costs by 28 to 37 billion euros (US$33.9 to US$44.9 billion) in the long term.
The study also shows some 90% of investments, or 30 to 35 billion euros (US$36.3 to US$42.4 billion) of annual revenue, could be captured by EU manufacturers and service providers, contributing to the post-pandemic economic recovery. Overall, investments in distribution grids will sustain 440,000 to 620,000 quality and local jobs per year in the EU27 and the United Kingdom.
Kristian Ruby, secretary general of Eurelectric, said: “Grid investments are urgently needed for the energy transition and they hold a huge potential for job creation. With the right framework conditions we can make the 2020s the decade of distribution grids. We call on policymakers to improve investment frameworks and tariff design, facilitate access to EU funds, and accelerate authorization and permit granting processes.”
Christian Buchel, chairman of E.DSO and director for Territories, Customers, and Europe at Enedis, said: “We own know-how and the technologies, IT and AI, to enhance the transition of the energy system. Nevertheless, we need decision makers, political bodies, citizens, regulators, financial institutions, and NGOs to understand how essential it is to reach the requested high level of quality investments that we can assure.”
This content was originally published here.