Round Table for Industry identifies €800bn EU energy infrastructure investment gap

The European Round Table for Industry (ERT) has found that a cumulative €800 billion of combined public and private sector investment will need to be funnelled into existing energy infrastructure, including the power grid, by 2030 to ensure the sector is fit for net zero.

The report, Strengthening Europe’s Energy Infrastructure, put together by Boston Consulting Group (BCG), highlighted the investment gap, which will need to be filled to deliver a core pillar of the Green Deal – abundant availability of competitively priced renewable energy across the EU.

This investment gap, which consists of financing national and cross-border infrastructure for power grids, hydrogen and CO₂, will further scale to €2.5 trillion ($2.7 trillion) by 2050.

On power grid investments, finds the report, if investments were to continue at their historical rate until 2050, there would be a 60% funding gap in the target investment range.

This means that spending on grid investments must more than double on an annual basis compared to historical trends if the EU is to reach its climate targets.

According to the ERT in a release, when it comes to the grid, the EU is in a privileged situation, as it has one of the largest interconnected grids in the world, but also has an underdeveloped Single Market for energy; these ambitions need further support through regulatory actions.

Commented Dimitri Papalexopoulos, chairman of TITAN Cement Group and chair of ERT’s Committee on Energy Transition & Climate Change:

“Infrastructure modernisation is where the rubber hits the road in the Green Deal, yet policymakers are not doing enough to enable the real delivery of the targets they have set.

“Companies of all shapes, sizes and sectors need to be reassured of the delivery of the infrastructure that will underpin the promised efficiencies and stability of the EU’s net-zero future. The incentives to attract much needed private investment are not there yet, so policymakers should tackle this urgently.”

The report states specifically that bridging the grid investment gap requires a collaborative effort between private and public capital, as well as a stronger Single Market with a supportive regulatory framework to entice private capital investments.

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This includes de-risking anticipatory grid investments, unlocking flexibility such as storage and demand response, streamlined permitting processes and a priority-based approach for electric grid development, as well as attention to new gases, including a role for low carbon hydrogen.

Concerning the development and rollout of next-generation energy infrastructure, the members of ERT recommend:

• Fast-tracking energy infrastructure development
• Facilitating more cross-border cooperation via transnational PPAs
• Addressing any market reform with a preliminary impact assessment study
• Incentivising both on- and off-shore interconnector planning
• Encouraging harmonisation of technical standards for more interconnection
• Ensuring strategic locations for demand centres for hydrogen and CO2
• Accelerating permitting

As a result, the energy transition would not only deliver sustainable power in a reliable and economical way to end users, but also drive growth and create jobs.

Companies led by ERT members are also proposing regulatory changes and asking policymakers to rethink Europe’s policy pathways to achieve its climate targets. This includes ensuring availability and affordability of low-carbon energy and CCUS, increasing financial attractiveness of decarbonisation and creating a level playing field for international competition.

The Strengthening Europe’s Energy Infrastructure report was one of two report’s put together by BCG on behalf of the Round Table; the other was Competitiveness of the European Energy-Intensive Industries, which takes stock of competitive pressure on European energy-intensive industries (EIIs), compared to global competitors.