Grids for Speed Takes the Wheel

Europe has taken on a bold and ambitious role in the fight for decarbonisation. The EU is setting its sights high, aiming to slash net greenhouse gas emissions by a whopping 55% by 2030 compared to 1990 levels, with a grand vision of becoming the world’s first climate-neutral continent by 2050. With less than six years left to tackle this challenging target head-on, our current energy system needs to kick into high gear – and fast. That’s where our latest collaboration with 安永 comes in. Grids for Speed lays out a roadmap for accelerating progress towards these pivotal goals by ensuring electricity infrastructure is ready to deliver the energy transition.

Freshly unveiled at last week’s Power Summit in Greece, our report delivers a clear message: Europe’s future is undeniably electric. To achieve decarbonisation, electrification across various industries must take centre stage in the European energy strategy. This transition is already well underway across the continent. From 1990 and 2020, emission intensity dropped by 54%, while the average carbon intensity in the EU 27 + UK decreased by 39% from 2000 to 2021. Additionally, the number of public electric vehicle charging points in the EU soared from 320,000 to 475,000 between 2021 and 2022.

While these findings, extracted from our Decarbonisation Speedways report, are promising, they fall short of what’s needed for the EU’s ambitious Net-Zero goal. As the demand for power in transport, heating, and industrial processes continues to rise, so does the need for stable, reliable, and abundant clean electricity. This means substantially increasing the amounts of renewable energy, particularly from wind and solar, added to the energy mix each year. Therefore, as electrification charges ahead, it is crucial that the energy system supporting it expands at a matching pace.

Let’s revisit 1990 once again. Since that pivotal decade, electricity demand has surged by 500 terawatt-hours (TWh), reaching 2,500 TWh today. And brace yourself - projections indicate that this demand will surge four times faster by 2050, rising from 2,000 TWh to over 4,500 TWh. Leading this transformation are electric vehicles (EVs), their chargers, heat pumps, and solar photovoltaics (PV). Projections underscore their importance in the near future: by 2050, we’re looking at roughly 250 million electric vehicles and heat pumps, marking a twenty-fold increase from today. Additionally, the number of public EV chargers will skyrocket to over seven million, marking a sixty-fold increase. Clearly, many crucial elements must come together. ‘Grids for Speed’ emphasises the importance of fitting these pieces together to tackle the challenge ahead. But here’s the kicker, for everything to fall into place, we’ll need a significantly larger investment than what we have today.

How do we take grid investment seriously?

Grids for Speed explores how to secure the necessary investments for our grids. Looking ahead, we’re talking about doubling current investment to keep up with projected doubling of electricity usage. At present, an average of €36 billion per year is invested in our distribution grids. But to meet the demands of tomorrow - expanding connections, increase substations, and embracing digitalisation – we’ll need to ramp that figure up to €67 billion annually until 2050.

Indeed, €67 billion per year might sound like a hefty price tag, but it’s crucial to consider the context. In 2023 alone, we spent a staggering €451 billion on fossil fuel imports – more than six times higher than our proposed investment. For perspective, we also spend comparable amounts in other forms of fundamental infrastructure across the EU, with €64 billion on roads and €49 billion on rail spent in 2021. Moreover, €67 billion represents just a tiny fraction of the current EU27 GDP, accounting for a mere 0.4%. That’s roughly €150 per person annually. And if you’re still not sold, stick around to learn of the solutions our report has uncovered on how to drive this now not-so-scary figure down further.

Striking while the iron is hot with forward-looking investments, performance excellence, and flexibility

Picture this: with the innovative solutions outlined in our report, that hefty €67 billion price tag, shrink to a leaner €55 billion annually – a potential 18% reduction in expenses! It all boils down to three strategies laid out in ‘Grids for Speed’.

First up, anticipatory investments: investing ahead of time offers substantial benefits for the transition. However, securing investment funds for future power demand is easier said than done, as many current regulatory frameworks reward alleviating immediate capacity constraints rather than societally beneficial metrics like short connection times. Nevertheless, ‘Grids for Speed’ reveals that this proactive approach, proves to be the most cost-effective, reducing overall investment needs by €6 billion annually.

Next on the agenda is asset performance excellence. This involves optimising the efficiency of the grids, ensuring every component operates effectively, and maximising the utilisation of their assets, all coupled with digitalising efforts. Even after factoring in the investment in digitalising the grid, this strategy could chip away another €1 billion from the ambitious €67 billion investment figure.

Last but not least, grid-friendly flexibility has emerged as a third key solution. By enabling system operators to manage congestion more effectively without just shifting peaks to other periods, the high investment costs could shave off an additional €4 billion.

Additionally, several digital strategies can also help lower costs. Smart transformers dynamically change voltage levels, optimising lower voltage distribution lines. Dynamic line ratings allow for real-time observation of external factors such as weather, reducing the need for reinforcement. A digital twin, a digital model and representation of physical network assets, provides real-time observability of the power infrastructure, enabling more efficient use and operation of the network.

?

In essence, by capitalising on smart investments, striving for performance excellence, and embracing adaptability, we not only seize the moment but also pave the way for a more cost-effective and resilient grid system.

Fortune favours the prepared

It’s clear as day that the grid needs more investment, but electrification today brings its own set of pressing challenges that demand immediate attention. Cyber-attack risks have surged, leading to data and operational losses. The military cyber-attack on a satellite in February 2022 serves as a stark example, disrupting internet connectivity for approximately 5,800 wind turbines in Germany. Furthermore, extreme weather events are increasingly affecting grid resilience, contributing to climate-related losses totalling a staggering €650 billion in the EU in 2022 alone. With electricity set to power 60% of all energy demand by 2050, the growing reliance on this energy form presents a significant challenge. After all, a reliable and resilient grid is crucial for the transition, making electricity infrastructure the backbone of the economy. This becomes even more important as customer expectations and their interactions with the grid continue to evolve.

These challenges could morph into major roadblocks to achieving the EU’s ambitious targets. The grid desperately requires more investment, and these issues must be tackled head-on and promptly; otherwise, the future of clean electrification across Europe hangs in the balance. Ignoring this could undermine energy security and the societal benefits of decarbonisation. What happens if the Continent sits idle? Let’s put it bluntly, 74% of key decarbonisation technologies won’t see the light of day. This would mean missed connections for 190 million heat pumps, 120 million EV chargers, 1220 GW of distributed renewables, and 240 TWh of industrial electrification. Moreover, the repercussions would be devastating: by 2050, Europe could face a shortfall of 62 million fewer heat pumps, 73 million fewer EVs, and 371 GW less solar PV if the necessary investments aren’t made. It is imperative that investments in modernisation stay laser-focused on three key areas: digitalisation, reinforcement, and expansion.

The payoff is going to be worth it…

What better way to illustrate the need for speed in the transition than by highlighting the numerous societal benefits that investing will bring. Reduced energy bills, a surge in green employment opportunities, a resilient transition framework, and a clear pathway towards a decarbonised future are all within reach. But here’s the real clincher, this investment scenario will dramatically reduce Europe’s fossil fuel import bill from €451 billion in 2023 to just €142 billion annually by the 2040s. That’s a substantial €309 billion reduction in fossil fuel imports, underscoring the tremendous financial and environmental benefits of this investment as well as the removal of the gas and petrol bill for many Europeans.

The real ‘payoff’ will be felt in bolstering the security of supply and energy security. Implementing ‘Grids for Speed’ at full throttle will not only facilitate rapid electrification but also accelerate decarbonisation efforts to meet European targets head-on. Unfortunately, the harsh reality is that at the current pace, the EU risks missing the ambitious 2050 net-zero target by over 30%, according to the European Environmental Agency. This shortfall is a stark reminder of the current overreliance on fossil fuels, primarily imported from outside the EU, raising concerns over supply security. It’s a clear call to action, ‘Grids for Speed’ must be swiftly implemented to safeguard our energy future.

How to get the ball rolling

So, how do we secure the investment needed to prepare the grid for the transition? It all starts with getting policy alignment in sync. Our report identifies five key areas where policy shifts can facilitate the financing flows for ‘Grids for Speed. Let’s delve into them.

1. Regulation

Much greater prioritisation is needed for large-scale investment for ‘Grids for Speed’ to take off. That means coupling capital expenditure (capex) for grid expansion with operating expenditure (opex) for efficient operation. Additionally, we must speed up the implementation of reforms like the Electricity Market Design (EMD) agreement, and any new initiatives need to be able to hit the ground running.

2. Finance

Tied closely to regulation, this area is rife with constraints. From affordability concerns and delays in recognising capital spending to problems with financing instruments, and de-risking tools, financing the grid is no easy feat. Keeping financing cost allowances up to date and adding more incentives to remuneration frameworks can give DSOs a much-needed boost.

3.?Permitting

Member states should focus on increasing collaboration with local planning authorities to manage permitting. Fast-tracking and streamlining approvals and permitting of projects in anticipation of future grid needs is imperative for timely delivery. Additionally, we believe that a bundling grid and project approvals, is another effective solution.

4.?Supply Chain

Scaling up the supply chain is a must to meet rising demands. We’re talking about acquiring more critical materials like copper, aluminium, and electric steel. Specifically, we will need over 100% more transformers and 70% more kilometres of power lines. Regulators should ramp up EU manufacturing, diversify the supply chain, shorten procurement and delivery times, and improve recycling practices.

5.?Skills

With a looming workforce shortage in the energy sector, we’ve got to act fast. Developing reskilling and upskilling programmes, along with accelerating process automation and digitalisation, can help bridge the gap and create the two million plus jobs needed for the grid transition.

Our recent study, Wired for Tomorrow , further highlights the significance of ramping up investments in a digitally enhanced grid. Providing a blueprint for how DSOs can leverage digital technologies to boost grid capacity, efficiency, and resilience, the report aligns perfectly with our mission of getting our grids up to speed. Eurelectric’s policy recommendations stemming from the study advocates for future-proofing the grid, ensuring interoperability and cohesiveness, and fostering innovation as ways to bolster the grid digitally.

Ready to drive Europe towards a more electrified future? Dive deeper into the insights and strategies outlined in our comprehensive report. Download Grids for Speed here .

This week's edition written by:

Juliet Destrade , Strategic Communications Trainee - Eurelectric

With technical input by:

Savannah Altvater , Head of Distribution & Market Facilitation - Eurelectric