Navigating Europe’s renewable energy challenges and the impact on distribution transformers
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Europe is investing heavily in power grid upgrades to accommodate renewable energy integration. However, delays in wind and solar project approvals and slowing installation rates are impacting the transformer demand in the region, writes Azhar Fayyaz of PTR.
With the global push towards decarbonisation, significant investments are being funnelled into upgrading power grids. This surge is driven by the electrification of transportation, including millions of electric vehicles, and the integration of renewable energy sources such as wind and solar power.
In 2023, global investments in grid upgrades reached approximately $376 billion, with the Asia-Pacific (APAC) region leading, followed by North America (NAM) and Europe. According to the IEA’s World Energy Investment Report, this figure is expected to grow to $400 billion in 2024 with $80 billion being allocated to Europe, accounting for 21% of the total.
To enhance its grid network and meet net-zero emission targets, Europe plans to allocate $600 billion between 2024 and 2030 for grid expansion and modernisation. These efforts include addressing aging infrastructure and ensuring readiness for the energy transition.
Renewable energy goals
Europe has set ambitious renewable energy goals, aiming to generate 42.5% of its energy from renewable sources by 2030, an increase from the previous target of 32%. This focus on clean energy has been intensified by the Russia-Ukraine conflict, which highlighted the need for energy security and sustainability. Additionally, nine European countries pledged in the 2023 Ostend Declaration to expand North Sea offshore wind capacity to over 120GW by 2030 and exceed 300GW by 2050.
Some country-specific targets for electricity generation from renewable energy include:
- Germany: 100% by 2035
- France: 40% by 2030
- UK: 60% by 2030
- Italy: 65% by 2030
Achieving these goals requires substantial increases in wind and solar power capacity. By 2030, Europe must:
- Expand wind power capacity from 220GW in 2024 to 425GW
- Increase solar capacity from 260GW in 2024 to 750GW
Progress and bottlenecks in wind energy
Historically, Europe’s solar energy market has shown impressive growth, with increases of over 40% in 2022 and more than 50% in 2023. However, growth slowed significantly in 2024, with installations rising by only 4% to 65.5GW. Europe must install at least 70GW of solar PV annually from 2024 onward to meet its 2030 targets, indicating a concerning shortfall.
For wind energy, project approval delays pose a critical bottleneck. According to WindEurope, over 500 GW of wind capacity in countries like Croatia, France, Germany, Ireland, Italy, Norway, Poland, Romania, Spain, and the UK is awaiting grid connection assessments. These delays directly impact the demand for distribution transformers, which are essential for integrating renewable energy into the grid.
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Examples of delayed projects
In November 2024, Sweden rejected applications for 13 major offshore wind projects along its eastern coastline due to defence concerns. These projects, totalling 30GW of renewable capacity, were key to Sweden’s renewable strategy.
In September 2023, the UK’s offshore wind power auctions failed to attract bids as developers cited inadequate government offers amid rising costs.
In December 2022, Spain’s auction for new onshore wind and solar projects saw poor results, with only 50MW of wind projects subscribed from the planned 3.3GW.
Vattenfall opened an offshore wind farm on the Dutch coast but announced it was suspending the development of its 1.4GW offshore wind farm due to a 40% increase in project costs, negatively impacting the company’s future earnings.
In Finland, the defence forces have also restricted offshore wind projects due to security concerns, with three out of ten projects halted and others delayed.
On the other hand, projects awaiting approval significantly outnumber those in operation and permitting times, extending up to seven years, exacerbate the issue.
Impact of renewable energy landscape on the distribution transformer market
The expansion of renewable energy, driven by ambitious government targets, is fueling demand for distribution transformers. These transformers are critical for integrating wind and solar power into the grid, which requires modernisation to handle increased capacity and variable electricity flow. However, project approval delays are slowing progress, creating a bottleneck for grid expansion. This, in turn, affects the demand for distribution transformers in the region.
Demand outlook of distribution transformers market in Europe
In 2024, Europe accounted for approximately 16% of the global demand for distribution transformers. However, the region’s market grew at a CAGR of 4.6% between 2021 and 2024, lagging behind APAC and NAM, which recorded CAGRs of 4.8% and 9.4%, respectively, during the same period. This underscores Europe’s relatively slower growth in the distribution transformer sector. In 2024, among European countries, Germany held the largest market share at 23%, followed by the UK at 11% and France at 8%.
Looking Ahead
Europe’s transition to renewable energy has a direct impact on its distribution transformer market. Utilities are expanding and modernising their grids to handle not only the increased capacity from renewables but also the variable and multidirectional electricity flow they require.
While the ambitious renewable energy targets drive demand for distribution transformers, delays in project approvals and security concerns pose significant challenges. Addressing these issues is crucial for meeting Europe’s renewable energy goals and ensuring the stability and efficiency of its power grid. Only by overcoming these hurdles can Europe achieve its 2030 and 2050 renewable energy targets, securing a greener and more sustainable future.
About the author
Azhar Fayyaz is a Research Analyst at PTR Inc. with a strong focus on power systems. He currently serves as the Product Manager for transformer-related topics such as distribution transformers, switchgear, substation automation, and power factor correction.
