Tech Talk | Europe’s electricity grids challenges

As electricity grids take central stage in the delivery of the transition to a net zero system, Europe’s transmission and distribution operators have highlighted some common challenges.

The EU’s Action Plan for Grids, released in November 2023, is the Commission’s response to the challenges facing the upgrading and expansion of the region’s grids to meet climate targets and net zero in 2050.

It contains several deliverables from the TSO and DSO organisations, respectively ENTSO-E and the DSO Entity, most in cooperation either with each other or with the Commission and/or the Agency for the Cooperation of Energy Regulators and with a mid-2025 deadline.

Specifically, the plan is based around a series of seven challenges to accelerate the pace of grid development, i.e.:

1. accelerating implementation of existing projects of common interest and developing new projects;
2. enhancing long-term network planning;
3. introducing a future-proof regulatory framework;
4. making better use of existing grids and smartening them;
5. improving access to financing;
6. ensuring faster and leaner permitting processes;
7. strengthening supply chains.

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A recent high-level roundtable was hosted by ENTSO-E to take stock of progress since the release of the plan and to identify where further efforts are needed, with three areas pertaining to grid infrastructure emerging – supply chains, financing and the regulatory framework.

A summary of key points from ENTSO-E’s report of the discussions follows.

Strengthening supply chains

Participants are reported to have recognised that supply chains need to be adequate and ensure equipment is available in the needed volumes and times and at reasonable prices.

TSOs, DSOs and manufacturers can work together and collaborate efficiently and transparently.

Part of the solution is to further harmonise practices throughout Europe, with short-term opportunities including common practices and specifications and longer-term technical standardisation and network codes.

Grid operators are working to increase the visibility of the pipeline of projects, but they should go further and work with regulators on securing timely implementation of the projects to facilitate investments in manufacturing capacity in Europe.

Further, European procurement rules should evolve to facilitate long-term agreements between grid operators and manufacturers, with some form of risk and benefit sharing to provide predictability.

There also remains a need to address the skills gap in the engineering workforce for grid projects, both for manufacturers and for grid operators, with suggestion to look for solutions at the scale of regional level, on top of the national and European levels, that could be easier to achieve in the short term.

Financing electricity grid infrastructure

As investments are scaling up, action is needed to de-risk grid investments.

The regulatory environment affects the access to capital on a global market and its costs for TSOs and DSOs. Authorities need to set up strategies that highlight the importance of grids and the continued political support as a reliable signal for investors in realising the energy transition.

Access to public funding and tailored new instruments can be more challenging for smaller grid operators. More awareness and best practice sharing is essential.

In addition, an upscaling of grid investments in line with political targets would merit an equitable allocation of public funds.

Regulatory framework

On the question of whether today’s regulatory schemes are adequate for the upscaling of electricity grids investments, participants are reported to have expressed diverging views.

Principles of efficiency and long-term planning exist today already, but further work is needed on how to handle long-term uncertainty in the context of timely delivery so that energy and climate targets are met.

Further dialogue and engagement between operators, manufacturers and regulatory authorities will be needed to bridge this gap in perception.

Participants also recognised the essential role of anticipatory investments and the need for clear definitions and guidelines as well as seen as a proper balance of short-term risk of low utilisation and longer-term timely availability of infrastructure.

In summary, the participants felt that these topics need strong cooperation throughout the whole value chain, including TSOs, DSOs, manufacturers, generation and flexibility providers. This cooperation needs a strong political leadership as well as forward-looking engagements with regulators.

An industrial roundtable that regularly meets would provide the needed drive to keep the momentum over the coming years and ENTSO-E intends to work with the Commission to see how this could be organised.

In the meantime, what immediate grid challenges is your utility facing?

Jonathan Spencer Jones

Specialist writer
Smart Energy International

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