Europe is pursuing one of the world’s most ambitious climate and energy goals. To help deliver the objectives of the European Commission’s (EC) European Green Deal of carbon neutrality by 2050; REPowerEU Plan to end Russian fossil fuel imports; and the revised Renewable Energy Directive (RED III) of reaching at least 42.5 per cent renewable energy sources (RES) share (but aiming for 45 per cent) by 2030, the European Union (EU) needs to upgrade and strengthen its transmission grid. EU’s well-interconnected internal energy markets with one of the world’s most extensive and resilient networks spanning 11 million km have played a critical role in ensuring stable supplies during the energy crisis. This has been possible largely due to the EU Trans-European Networks for Energy (TEN-E) Regulation, which has selected over 100 electricity projects of common interest (PCIs) over the last decade and facilitated their permitting and construction including by funding through the Connecting Europe Facility (CEF) funds.
Going forward, EU’s electricity consumption is expected to increase by around 60 per cent between now and 2030. Networks will have to accommodate a more digitalised, decentralised and flexible system with millions of rooftop solar panels, heat pumps and local energy communities sharing their resources, more offshore wind (OSW) coming online, more electric vehicles (EVs) to charge, and growing hydrogen production needs. Wind and solar generation capacity alone is expected to increase 2.5 times from 400 GW in 2022 to at least 1,000 GW by 2030, including a large build-up of OSW of up to 317 GW. With RES expected to contribute to around half of the EU’s 2030 energy supply, distribution grids, 40 per cent of which are over 40 years old, will need to be transformed substantially in parallel to accommodate this expansion. Further, as per the European Network of Transmission System Operators for Electricity’s (ENTSO-E) Ten-Year Network Development Plan (TYNDP), cross-border transmission capacity is expected to double over the next seven years, with an additional 23 GW of capacity being incorporated by 2025 and a further 64 GW by 2030. Consequently, an estimated investment of a whopping EUR584 billion is required in EU transmission and distribution (T&D) grids. Continuing its support to the grid rollout, the EC has put in place a legal framework with the revised TEN-E Regulation (June 2022), RED III (October 2023; which streamlines permitting of networks necessary for RES integration), regulation and proposals for a Net-Zero Industry Act (NZIA; November 2023; which includes grid technologies in its scope) and a reformed electricity market design (EMD; October 2023).
In the latest move, on November 28, 2023, the EC released a communication ‘Grids, the missing link: An EU Action Plan for Grids’ under the European Wind Power Action Plan presented by it in the previous month. It follows the first High-Level Electricity Grids Forum that the ENTSO-E hosted under the EC’s patronage in September 2023. The Action Plan identifies several interlinked measures that can be completed within the next 18 months to provide an adequate investment framework for grids. In addition to the Action Plan, the EC released the sixth list of projects of common interest (PCIs) and the first EU list of PCIs and projects of mutual interest (PMIs; between EU and third countries) established under the revised TEN-E Regulation, to bring the EU’s energy infrastructure in line with its climate goals. It is also accompanied by a ‘Pact for Engagement’ to ensure broad stakeholder engagement in grid development.
Renewable Watch presents the highlights of EC’s recent releases.
EU Action Plan for Grids
The EC’s Action Plan for Grids aims to address the missing links of the clean energy transition. It will ensure that EU grids operate more efficiently and are rolled out further and faster. It addresses the main challenges in expanding, digitising and better using EU electricity T&D grids. Specifically, it identifies concrete and tailor-made actions to help unlock the needed investment to accelerate the European electricity grid upgrade. The 14-point action plan to address seven horizontal challenges to accelerate the pace of grid development will make Europe’s electricity grids stronger, more interconnected, more digitised and cyber-resilient to make a difference in time to achieve the 2030 objectives.
- Accelerating PCI implementation and developing new projects through political steering, reinforced monitoring and new proposals: Going forward, the TEN-E framework will gain further importance in line with the expected growth in cross-border grid needs, to integrate and transmit large amounts of new RES generation across Europe. PCIs will also support EU countries in reaching the 15 per cent electricity interconnection target. Cross-border projects can decrease generation costs by EUR9 billion annually to 2040, while investments needed in cross-border capacity and storage amount to EUR6 billion annually. The timely completion of PCIs, the latest of which was approved on November 28, 2023 (more details covered subsequently), is key to ensuring that they can have an impact within this decade. Avoiding the slippages and delays that hampered PCI completion in the past requires an extra effort to monitor progress and swiftly remove bottlenecks and obstacles to implementation. The TEN-E’s comprehensive EU-wide TYNDP identifies significant additional system needs for 2040 and beyond. These should be matched by new PCIs in the subsequent lists and a robust pipeline of new projects must be developed and included in the updated PCI lists every two years. For the period 2021-2027, CEF for energy has a grant budget of EUR5.84 billion, which is available to new categories of offshore grids, electrolysers, hydrogen infrastructure, energy storage, CO2 storage and smart gas grids in addition to electricity, gas, smart grids and CO2 networks. CEF is limited to PCIs and does not cover local distribution system operator (DSO) needs. However, other EU funding possibilities such as the Cohesion Fund, European Regional Development Fund (ERDF), Recovery and Resilience Facility (RRF) or the Modernisation Fund are available for electricity grids, but some are under-utilised. The Recovery and Resilience Plans allocate around EUR13 billion to grids, covering reforms and investments in grid infrastructure, smart energy systems, energy storage facilities and digitisation of distribution and transmission networks.
- Improving the long-term planning of grids to accommodate more RES and electrified demand, including hydrogen, in the energy system by steering the work of system operators (SOs) and national regulatory authorities (NRAs): Building on past experience in pan-European network planning through TYNDP, the revised TEN-E regulation requires ENTSO-E to prepare offshore network development plans (ONDP), the first of which is due in January 2024. This should further be expanded together with onshore and offshore network planning under a common framework through the next TYNDP process. To ensure progressive integrated energy system planning, ENTSO-E should further strengthen the synergies among different energy carriers in the TYNDP, ensuring engagement of the relevant stakeholders for distribution, storage, hydrogen, CO2 and gas sectors as these sectors reach adequate maturity. NRAs should ensure that SOs further assess the flexibility needs of their energy systems when planning transmission networks, including the potential of energy storage as per the upcoming revised EMD legislative framework. At the distribution level, the EU DSO Entity (the association of DSOs) should, by mid-2024, publish recommendations to improve distribution network planning in close coordination with ENTSO-E and TSOs and network users like RES, electromobility or heating and cooling, considering the uncertainties affecting DSO activities and their heterogenous size. Around 2,560 DSOs in EU cover 10 million km of distribution grids containing a wide spectrum of sizes and disparities in national concentrations. Adequate data sharing through a common platform will support DSOs in planning network needs to shorten grid connection times. EC plans to include grid-related actions in the iterative process with EU countries on their National Energy and Climate Plans (NECPs).
- Introducing regulatory incentives through guidance on anticipatory, forward-looking investments and on cross-border cost-sharing for offshore projects: Anticipatory investments can be relevant in cases such as investing in future-proof offshore networks that allow for future expansions of meshed offshore grids; areas with high untapped onshore PV potential; and grid connections to ports for provision of shoreside electricity supply. To support this, the EC, in consultation with the Agency for the Cooperation of Energy Regulators (ACER), ENTSO-E and EU DSO Entity, plans to propose by the first quarter (Q1) of 2025 guidance identifying conditions under which the approval of anticipatory investments should be expected. Offshore networks will be composed of radial and hybrid transmission projects evolving towards a future meshed grid while the connection of energy islands and other large OSW projects will bring large benefits to society. It poses challenges in agreeing on the appropriate cost allocation approach. The EC plans to address this in a guidance aimed at supporting EU countries and NRA in such activities by June 2024.
- Incentivising the better usage of grids with enhanced transparency and improved network tariffs for smarter grids, efficiency and innovative technologies and solutions by supporting the cooperation between SOs and recommendations by ACER: ENTSO-E and EU DSO Entity, in cooperation with the EC and NRAs, should work towards harmonised definitions for available grid hosting capacity to be able to provide a pan-EU overview of available grid hosting capacities for new network users to connect by mid-2025. They should also support SOs in digitising and streamlining procedures for grid connection requests. To promote effective utilisation of existing assets, SOs must increasingly deploy available innovative technologies such as dynamic line rating (DLR), high-temperature superconductor (HTS) cables, static synchronous compensators (STATCOM), voltage source converters (VSC) in high voltage direct current (HVDC) systems, HVDC breakers or phase shifting transformers (PST). ACER, in its next tariff report due in January 2025, must recommend best practices for the promotion of smart grids and network efficiency technologies through tariff design, focusing on the consideration of operation expenditure (opex) in addition to capital expenditure (capex) and benefit sharing.
- Improving access to finance for grid projects by increasing visibility on opportunities for EU funding programmes, especially for smart grids and modernisation of distribution grids: SOs are faced with an unprecedented increase in the volume of capex. To fill the funding gap, the EC plans to identify tailored financing models and strengthen dialogue to address obstacles to private financing. The EC and the European Investment Bank (EIB) will explore further the need for financing tools and instruments to support grid investments at large, in the context of InvestEU. As mentioned earlier, major funding sources such as ERDF, CF and RRF, including its REPowerEU component, are not fully utilised. Countries must consider the available options to increase allocations for smart grids and modernisation of distribution grids.
- Stimulating faster permitting for grid deployment by providing technical support for authorities and guidance on better engaging stakeholders and communities: EU countries could adopt the provisions of the emergency Council Regulation (December 2022) and transpose the revised RED III to accelerate T&D grid development necessary for RES integration. The EC plans to update by Q4 2024 the existing guidance on streamlining environmental impact assessments (EIAs) for PCIs and PMIs and the guidance on energy transmission infrastructure and EU nature legislation to adapt them to the revised legislative frameworks of TEN-E and RED and their streamlining permitting provisions. From 2024, the EC will support the digitisation of permitting procedures for grid projects through the Technical Support Instrument (TSI). To address potential public opposition and ensure the highest standard in stakeholder engagement, the EC launched a Pact for Engagement for early, regular and meaningful stakeholder engagement and the need for adequate regulatory support (more details covered subsequently).
- Improving and securing grid supply chains, including by harmonising industry manufacturing requirements for generation and demand connection: While the EU industry is a global leader in manufacturing power systems like HVDC systems, which is critical to delivering EU’s offshore ambitions, long and growing lead times for procuring specific grid components due to tight supply or increasing raw material prices remain major concerns for project developers. ENTSO-E and EU DSO Entity must collaborate with technology providers to develop common technology specifications and improve the visibility of grid project pipelines to facilitate investments in manufacturing capacity and secure supply chains. Further, the EC plans to promote common technical requirements for generation and demand connection.
To ensure the effective implementation of the Action Plan, the EC plans to set up a dedicated platform within the Copenhagen Energy Infrastructure Forum (organised by EC annually to discuss major issues relating to infrastructure and EU energy policy) to regularly monitor the progress and report on the plan delivery.
Pact for engagement
The EC launched the Pact for Engagement with electricity sector representatives to raise public awareness of the crucial role of grids in accelerating the clean energy transition. The pact calls on EU countries, NRAs, project developers and civil society to work together towards early and regular public participation in grid development projects, and to the views, ideas or concerns of local communities. It underscores the importance of communication on the role of grids in the clean energy transition; more engagement in the fora such as the established high-level groups focusing on grid acceleration and faster implementation of permit-granting rules; regular dialogue among ministries, NRAs and SOs on engagement activities; and stakeholder engagement activities.
The first signatories of the pact were EC’s Director-General for Energy, high-level representatives of ENTSO-E, EU DSO Entity, ACER, and Renewables Grid Initiative (RGI) (a collaboration of non-government organisations and TSOs to promote 100 per cent RES integration into the EU grid).
EU list of PCIs and PMIs
The EC has adopted the sixth EU list including PCIs, and the first list of PCIs and PMIs established under the revised TEN-E Regulation that ensures that EU-supported cross-border energy infrastructure projects help the EU achieve its 2030 and 2050 targets for energy and climate. The EC adopted the list of PCIs and PMIs in the form of a delegated regulation, which will be submitted to the European Parliament and Council, which has two months to decide on the list. Once adopted, the EC will work with project promoters and member countries to support their rapid implementation, in line with the enhanced measures in the EU Action Plan for Grids.
The latest PCI and PMI list includes 166 energy projects, of which 85 relate to electricity, offshore and smart electricity grid projects, around half of which are expected to be commissioned between 2027 and 2030; 65 are hydrogen and electrolyser projects (included for the first time given that it will play a major role in enabling energy system integration and decarbonising the EU industry); and 14 CO2 network projects [in line with EU’s goals to create a market for carbon capture and storage (CCS)]. Many of the electricity projects included under the sixth PCI list were also part of the previous list. However, the list has expanded from 67 in the previous PCI list. It includes a renewed focus on electricity with 68 projects (including 12 storage projects), 5 smart grid projects and, for the first time, a new category on offshore infrastructure with 12 projects.
The TEN-E Regulation establishes 11 strategic geographical infrastructure priority corridors in the areas of electricity, offshore grids, hydrogen and electrolysers, and three EU-wide infrastructure priority thematic areas for smart electricity grids, smart gas grids and cross-border CO2 network. It also lays down a set of measures to ensure that PCIs and PMIs are implemented in a timely manner. These include strengthened transparency and improved public consultation; an accelerated and streamlined permit-granting procedure including a binding time limit of three-and-a-half-years for this procedure; a single national competent authority acting as a one-stop-shop for permit-granting procedures; a single point of contact for offshore renewable grids; improved regulatory treatment by allocating costs across borders according to the net benefits, and regulatory incentives; and eligibility of applying for financial assistance under CEF in the form of grants.
The way forward
Interconnected and stable energy networks are the backbone of the EU’s internal energy market and key to enabling the green transition. Grid modernisation, expansion and smartening are highly needed at both T&D levels to enable the energy transition across all economic sectors. The grids need to be prepared for the new system needs to integrate RES and flexible demand. The policy guidance and actions at the EC level will give confidence to the sector and industry at large to take the giant leap forward involving a complete transformation of the energy landscape. The key now lies in effective and timely implementation.
