This is an extract from a recent report “Putting the mission in transmission: Grids for Europe’s energy transition” by EMBER.

Grid investments across Europe must be stepped up and planning processes fully aligned with the new reality of the energy transition. Grids have recently skyrocketed onto the political agenda. As clean technology deployment surges forward, it is increasingly coming up against the bottleneck of insufficient grid capacity, leading to connection delays, curtailment and increased costs for consumers.

The analysis, based on 35 national grid development plans from European Transmission System Operators (TSOs) of electricity, shows that planned network developments in a number of countries are out of step with the reality of the energy transition. This risks that grid investments will be insufficient to deliver on 2030 energy security and climate ambitions. This must be urgently addressed, particularly as grid developments are characterised by much longer timescales than clean technologies. Additionally, failing to address grid capacity issues in a timely manner will be expensive, and already constitutes a substantial cost for many countries.

Gridlock

Grid outlooks suggest the energy transition is at risk. The challenge lies in ensuring that network planning is sufficiently forward-looking to adapt to an accelerating transition with many faster moving pieces, notably wind and solar. The energy crisis and Russia’s invasion of Ukraine has turbocharged Europe’s shift from fossil fuels to renewables. The results of this are already evident, with renewables rising to a record 44% of the EU’s electricity mix and fossil fuels dropping by 19% to their lowest ever level in 2023. However, as clean technology investment reaches record highs, its deployment has started to come up against previously overlooked challenges. One of these challenges is a lack of grid capacity.

In some places, grid capacity is reaching its limit due to insufficient expansion, ageing infrastructure and inadequate flexibility. Signs of stress in the form of lengthy grid connection queues and increasing curtailment of renewable electricity have drawn attention to the central role of grids in decarbonising Europe’s economy, pushing grids far up the political agenda for perhaps the first time. Notable developments include the High-Level Forum on the “Future of our Grids” in September 2023, organised by ENTSO-E with the patronage of the European Commission, and the EU Action Plan for Grids published in November.

What makes up the grid?

Electricity grids can be broadly classified based on their voltage levels, typically into distribution systems (medium and low voltage), managed by Distribution System Operators (DSOs), and transmission systems (extra-high and high voltage), managed by Transmission System Operators (TSOs). As the energy system becomes increasingly renewable, electrified and decentralised, each part of the power grid and its operators play a distinct role, involving different stakeholders and policy processes.  TSOs must balance regional variations in supply and demand and integrate an increasingly diverse electricity generation mix, all while continuing to ensure secure and continuous supply. Active cooperation between TSOs and DSOs in both planning and operation of power grids is crucial to integrate new technologies efficiently across voltage levels.

Insights from grid plans

Grid development plans by Europe’s TSOs provide the clearest window into the current status and outlook of countries’ internal transmission networks. In line with Directive (EU) 2019/944 for the electricity market, TSOs publish their ten-year grid plans approximately every two years, setting out the actions necessary to ensure security of supply, efficiency and achievement of decarbonisation targets while keeping costs low. The plans detail the main transmission infrastructure that needs to be built or upgraded over the next ten years, outlining ongoing and new investments. This is a separate process to the development of the Ten-Year Network Development Plan (TYNDP) undertaken by the European Network of TSOs for electricity which focuses exclusively on cross-border transmission lines.

Grids must move in step with renewable generation and clean demand-side technologies in order to deliver the benefits of the energy transition to consumers. Energy supply and demand scenarios lie at the core of the grid plans, with the need to expand or upgrade infrastructure highly dependent on which forecasts are explored. To assess how these match up to the current trajectory of Europe’s energy transition, our analysis benchmarks these scenarios against the latest national energy targets and recent market outlooks for wind and solar. The degree of alignment provides a high-level indication of the preparedness of national transmission grids to accommodate the envisioned changes in the energy system necessary to achieve policy goals and facilitate the integration of accelerating renewable deployment.

Grid plans misaligned with national policy targets

Analysis of grid plans shows that planned transmission grid developments may be insufficient to cater for the renewable uptake that is necessary to achieve energy policy targets. The energy scenarios in the latest grid plans from European TSOs show a high degree of misalignment with current policy targets in certain countries. This is particularly evident in the foreseen installed capacity of wind and solar in 2030. Since it takes far longer to increase grid capacity than it does to deploy wind and solar projects, grids may not be prepared to meet the scale of future increases.

Planned wind and solar capacities are in some cases misaligned with targets

Close alignment with national wind and solar targets should be expected in TSO grid plans, since national legislation related to grid planning often requires TSOs to abide by existing energy policies targets when preparing their plans. However, analysis shows that this is not always the case, with some plans significantly undershooting the national targets. When TSOs’ assessments of future infrastructure needs are based on under-ambitious scenarios, it is likely that new investments necessary to support policy targets will be overlooked and their development delayed. This means that, instead of playing an enabling role, transmission grids in a number of countries risk being unprepared to support the wind and solar roll-out expected by national policy, creating a physical barrier to the transition.

The four plans based on scenarios with higher capacities for wind and solar include Croatia, Denmark, Finland, and the Netherlands. The scenarios used by most of these TSOs are significantly more ambitious than existing targets, ranging from 50% higher for Denmark to 200% higher for Finland. Across these four countries, the grid plans are preparing for 81 GW more wind and solar than national policy targets. This is a sensible approach that better prepares transmission networks to accommodate potential future step ups in national ambition levels. Indeed, the Finnish TSO notes its scenarios tend towards more positive outcomes as scenarios limited in ambition will not challenge Finland to prepare for the energy transition, but could only guide it to resolve short-term challenges. 

Solar tends to be more underestimated

To understand how grid planning is tracking against overall targets, combined wind and solar shortfall is a useful indicator. However, considering them separately shows that in some plans one or the other may be more significantly out of step with national policy. The split between wind and solar is an important factor when planning a transmission grid, as their installations are likely to be built in different locations according to the distinct resource potential for each energy source. This would impact the locations where grid investment is required to address local geographical imbalances between production and consumption. Therefore, considering misalignment by source reveals where grid issues could be more likely to emerge. Solar tends to be more affected by misalignment, with solar’s capacity underestimated by 60 GW across 11 countries. The same number of countries use wind capacities which are lower than national targets, but the discrepancy results in a relatively smaller difference of 27 GW.

Aligning targets and infrastructure planning

It is likely that the observed misalignment between grid plans and policy targets stems from a time lag between the establishment of national policy and the development of grid plans. In most cases, underestimates in grid plan capacities match more closely with previous, superseded policy targets. The common requirement for TSOs to abide by established national targets when planning their grid, while logical in principle, is causing grid plans to persistently lag behind the latest level of ambition. The process of transposing political targets into national legislation, and subsequently incorporating them into grid plans creates a sequential time lag. This means that grid planning, despite its cyclical nature, is often unable to keep up with the widespread increases in EU and national ambition levels, particularly over the last five years. The EU’s 2030 targets for renewable energy were initially increased from 27% to 32% in 2018, and subsequently raised further in 2022 to 42.5-45% in response to the gas crisis.

Additionally, targets themselves often lag behind other external conditions, making it difficult for grid plans to keep up with the fast evolution of the energy landscape and therefore better reflect and prepare for reality. Grid plans require approximately two years to be developed, owing to their complexity, and the energy scenarios that form the basis of these plans are largely fixed at the start. Power networks should be ready to facilitate renewable and clean technology deployment, but this will not be achieved if grid plans remain exclusively rooted in targets established in national legislation at the start of the planning cycle. This is especially important as grids typically take much longer to build than renewable generators. 

Grids risk being unprepared for the upcoming solar surge

While many grid plans already lag behind policy commitments, market trends in some clean technologies are outpacing both. Clean technologies are accelerating so swiftly that they surpass even the most ambitious EU policy targets. Solar, in particular, is consistently underestimated in grid expansion plans compared to market outlooks. Out of the 23 plans that could be assessed against solar industry outlooks, 19 were found to be significantly lower than the 2030 market forecasts, between 12-82% below expected capacities. Across the 23 plans, a total of 205 GW less capacity is being planned for in grid developments than the market expects.

This disconnect from on-the-ground trends implies, unless remedial actions are taken, grid congestion may worsen in the short-term and larger volumes of solar capacity may become stuck in grid connection queues. The situation for wind is less obviously misaligned, likely due to more stable outlooks for the sector, but there is still evidence of disconnect. Out of the 31 grid plans that could be compared to WindEurope market outlooks, ten were found to use lower wind capacities (13-80% lower) than those expected by the industry in 2030, underestimating wind installations by a total of 17 GW. In contrast, 12 grid plans use higher capacities for wind, a positive difference of 44 GW. 

Europe’s energy transition will be powered through its enormous grid

The extensive connections within and between countries are an enormous asset in enabling Europe to rapidly decarbonise, providing the necessary infrastructure to accommodate higher volumes of electricity from increasingly distributed generation sources in new geographic locations — wind and solar. However, grid planning will need to become more nimble to match the increasing ambition and need for renewables across Europe.

Aligning grid capacity

Lack of grid capacity can be addressed in two ways. Firstly, by physically expanding the capacity. This is done by adding new power lines to existing routes and establishing new routes. Secondly, by maximising the use of the existing networks through refurbishment of existing lines, digitalisation, and greater utilisation of demand flexibility and storage. These actions are complementary and both indispensable in tackling the grid challenge. While there are concerns that TSOs are incentivised to favour new builds over other solutions, it should be noted that maximising the use of the existing infrastructure alone will not be sufficient.

Non-wire solutions can rapidly address grid capacity scarcity

The need for additional grid capacity in the near-term may be greater than what can be delivered in the form of new lines in some countries, as already acknowledged by some TSOs. TSOs are therefore increasingly incorporating alternative approaches that can more swiftly (and cheaply) alleviate the problems of a lack of grid capacity. Load flexibility constitutes another non-wire solution; smoothing out fluctuations and lowering peaks can alleviate pressure on grid capacity as grids are dimensioned according to the expected peak load. The Dutch TSO TenneT, for instance, has proposed initiatives for large companies and major consumers use less electricity at peak times to alleviate pressure on its grid, with financial incentives also providing benefits to consumers.

Integrating hydrogen in grid planning is necessary

Hydrogen production and consumption, which is receiving increasing attention following the publication of REPowerEU, has significant implications for the power grid. Electricity TSOs are, thus, progressively incorporating these considerations into their grid plans, although some only consider one side of this equation. Integrating the structural effects of hydrogen demand and supply in electricity grid planning is also necessary for both electricity and gas TSOs to analyse the optimal sizing of grid infrastructure.

Financing the future grid

Grid plans provide an estimate of the necessary funding to cover the proposed grid investments (reported by 31 out of the 35 plans examined). Cumulatively, these represent an average spending of just over €30 billion euro each year. While substantial, failing to address grid issues will be more expensive, and already constitutes a substantial cost for many countries. In 2023, managing its already constrained grid cost Spain €2.04 billion, actually exceeding its investment in the transmission grid, an average of €1.16 billion. In 2022, Germany spent more than €4 billion on congestion management alone. This is about 30% of the €13.5 billion average annual investment earmarked for the transmission system.

Recommendations

Political prioritisation of grids: The critical role of power grids for achieving EU energy and climate goals should be firmly embedded in the political agenda. This would enable strengthened political support and financing, as exemplified by the Biden-Harris administration in the US and the Dutch government. 

Regulatory frameworks must be revised to allow timely planning and investment: National legislation in many countries mandates that TSOs base their network planning on energy scenarios that are in line with the energy targets enshrined in legal documents. This mandate should be revised to encourage TSOs to use energy scenarios that better reflect ongoing policy discussions and market trends of key technologies, even where these developments mean binding national targets will be exceeded. 

Increased oversight and scrutiny of network plans: Given the central role of grids in providing energy security and facilitating the energy transition, their planning and development would benefit from additional oversight. 

Reporting transparency and standardisation: TSOs should be required to regularly publish data on key indicators, including but not limited to grid connection queues, available grid capacity and planned investments. Grid operators should be required to publish the energy scenario(s) used for identifying necessary grid investments in an accessible and standardised form, to allow better scrutiny and monitoring.

Place clean power at the core of grid planning to enable anticipatory investments: The EU’s commitment to limit global heating to 1.5C requires the development of a predominantly clean power system across Europe by 2040. To ensure adequate preparation of electricity infrastructure, future scenarios used to plan the grid must fit such a vision. 

Access the complete report here