EU could be ‘pre-eminent destination for investment capital’… but work is needed

Barriers to investment must be broken to accelerate electrification, decarbonisation and competitiveness

Europe’s electricity industry is looking on the bright side, judging by its muted reaction to the proposed ban on future imports of Russian gas into the EU, writes Vic Wyman in Brussels.

The European Commission says that new import contracts will be banned from the end of 2025 and that no more Russian gas will be imported into the EU from the end of 2027.

For power plant operators that run gas turbines, alternatives could include liquefied natural gas from elsewhere, more domestic production — and more renewables.

Currently, gas accounts for about 15% of EU electricity production and the share is falling, down from about 19% five years ago, says the Eurelectric federation of more than 3500 European power generation, distribution and supply utilities.

The European Commission says that the diversification of energy supplies, partly resulting from the ban on Russian gas, and other energy sources, would lead to greater energy security and resilience in the bloc, increase decarbonisation and boost industrial competitiveness. Fossil fuel imports in 2024 totalled €350 billion, down from a record €600 billion in 2022.

The electricity sector is on board: “Electricity is sovereignty, is security, is vital,” Eurelectric’s secretary general Kristian Ruby told his organisation’s recent Power Summit in Brussels, Belgium.

Electrification away from fossil fuels was needed to unlock a new era of industrial growth, he said. As fossil-fuel generation is the marginal price setter, adding more lower-cost renewables reduces electricity bills.

Climate action

However, a doleful Dan Jørgensen, EU Commissioner for energy and housing, told the conference that more action was needed on climate change, as in 10 years’ time: “It will be worse, much worse.”

The actions needed were well known, he said, including adding more renewables, which were saving €33 billion a year. “But we need to do it faster,” he added. “There are many things that we can do and will do.” The target was a saving of €45 billion a year, he said.

Jørgensen said that the EU’s current industrial competitiveness suffered because energy in the EU was two to three times as expensive as in the US: “We do need to lower prices on electricity.”

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“Electrification is the driver of competitiveness, is the driver of decarbonisation,” said Ditte Juul Jørgensen, director general for energy in the European Commission.

Yet Dan Jørgensen said that the move by the US under President Donald Trump away from the cheapest and cleanest way to produce electricity was “an opportunity” for Europe. That was echoed by Mechthild Wörsdörfer, deputy director-general of the European Commission’s energy arm, DG Ener.

Jon Phillips, chief executive of the Global Infrastructure Investment Association (GIIA), was also sanguine about the benefits of the EU’s size and stable policy.

“That creates a fantastic opportunity for the European Union,” he said, suggesting that the EU could be “the pre-eminent destination for investment capital”. That could include power supplies for the booming market for data centres, he said.

And although European electricity might be expensive, that has made Europe very good at energy efficiency and energy saving, said Jean-François van Boxmeer, chair of the board of the telecommunications company Vodafone and chair of the European Round Table for Industry.

Permission sought

However, many in the electricity sector believe that factors such as slow and inefficient permitting systems for projects and high prices for all types of consumers are hobbling advances.

Permitting for a project in the US took perhaps three and a half years, compared with perhaps eight years in the EU, or 10 years for a complicated project, said DG Ener’s Wörsdörfer.

Permitting for projects was one of the biggest brakes on investment, said Leonhard Birnbaum, former Eurelectric president and chief executive of the electricity utility E.ON: “It’s one of the biggest bottlenecks.” That was followed closely by the problem of unaffordability of electricity, he added.

Charging companies for applications for access to grids would help to speed up permitting by clearing the mass of speculative applications from the currently clogged-up permitting systems, said Birnbaum.

The European Commission has acknowledged that permitting is barely living up to its name. It has promised that, as a general rule, project approval should not take more than six months, or up to two years for bigger projects.

By the end of the year, it will publish a grid package that will address permitting. One of the aims is to accelerate the setting up of cross-border grids between EU countries, as well as boosting digitalisation and smarter operation. “We need more grid and to use the existing grids better,” said Wörsdörfer.

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EU-action could be on the way. Lars Aagaard, the Danish minister for climate, energy and utilities, told the Eurelectric meeting that a common European approach to planning was needed. “It’s become too complex, too slow,” he said “We must build more infrastructure.”

Money talks

There is a widespread belief that the sector needs to spend heavily if the EU is to meet its long-term energy and environmental targets. “If energy security is the target, that leads you to investment,” Roger Martella, chief corporate officer of GE Vernova, told the audience. Europe’s focus on energy security has been an example to the rest of the world, he added.

As is often the case, everyone wants more money. Sebastian Burduja, Romania’s energy minister, said that although his country had recently received €14 billion for decarbonisation, “there is still not enough money for our grids”. There was €1.9 billion for grid modernisation, “but it’s not enough”, he added.

However, he called for belief in the EU with no backsliding. “Brussels needs to stand firm to its principles,” he said. That included ensuring a single European energy market, which he said would benefit all of the EU, both the western part and the less prosperous eastern part.

“The EU’s biggest competitor is itself,” said GIIA’s Phillips, citing the lack of a single market. “It’s 27 investment markets.”

He also claimed that the private sector carried out more efficient spending and innovation than the public sector. Non-private electricity distribution system operators (DSOs) needed to allow private investment, he said: “Without those models it’s a redundant conversation.”

Phillips told Enlit that a suitable split between public and private capital needed for investments, especially in DSOs, was 70% v 30%.

E.ON’s Birnbaum also claimed that markets allocated capital better than the public sector and called for less regulation of the sector and for allowing stronger market signals for investors.

Phillips added that funding by GIIA members for electricity sector investments was readily available as the risks of investing in such core infrastructure were well understood. “If it’s a stable, regulated industry with a clear revenue stream linked to infrastructure than it’s a core investment,” he told Enlit.

Yet he said that the sector would always face the dilemma of investability and affordability, with someone having to pay in the short-term for projects that would yield returns in the long-term.

The more diverse an electricity system, thanks in part to more distributed renewables, the lower the cost of electricity in the long-term, but how do you pay for that up-front, asked Michael Lewis, the chief executive of the German state-owned energy company Uniper SE?

Birgitte Ringstad Vartdal, chief executive of the Norwegian state-owned hydropower company Statkraft, said that public involvement in power sector spending was needed partly because the sums needed were so large.

She said that the public sector could reduce investment risks rather than stump up all the money needed. The European Commission is now rethinking the rules that currently limit state aid that EU countries can provide.

Originally published on Enlit World.