Empowering Europe’s Energy Transition: Challenges and Opportunities in introducing power grids 

The European Commission released the long-awaited new Grids Action Plan on the 28th of November, which aims to ensure electricity grids are deployed faster and digitalised to accelerate the transition to renewables. The Action Plan is expected to be discussed in the Transport, Telecommunications and Energy Council in spring. 

Long waiting times for permits and old local distribution grid infrastructure are two of the pressing challenges of the industry, amplified by the growing numbers of households connecting electric vehicles, heat pumps, and solar panels to the grid. The Commission estimates that €584 billion in investments for electricity grids alone is needed. This represents a sizeable portion of the overall investment in the green transition. 

What are the key points of the Action Plan?

  1. Improving the long-term planning of grids to accommodate the integration of more renewables and electrified demand in the energy system.  
  1. Introducing regulatory incentives through anticipatory investments and offshore cross-border cost sharing to drive grid development.  
  1. Incentivizing better usage of the grids with enhanced transparency and improved network tariffs for more smart grid network efficiency and innovative technologies.  
  1. Boosting access to finance by increasing visibility on EU funding programs for smart grids and modernization of distribution grids.  
  1. Stimulating faster permitting for grids deployment by providing technical support for authorities and guidance on better engaging stakeholders and communities.  
  1. Improving grid supply chains by harmonizing industry manufacturing requirements. 

Concurrently with the introduction of its Grid Action Plan, the Commission has disclosed a fresh compilation of Projects of Common Interest (PCIs) eligible for EU funding. Among the 166 projects chosen, 85 pertain to electricity, offshore, and smart electricity grids, with a substantial portion anticipated to begin between 2027 and 2030, according to the Commission. Notably, the list includes 65 hydrogen and electrolyser projects, which signals hydrogen’s pivotal role in facilitating energy system integration and decarbonization, as outlined by the Commission. 

What is the impact on different electricity sectors? 

  a) Wind industry 

For the wind industry, a notable concern is the absence of specific guidelines for Member States on reserving grid capacity for strategic net-zero technologies. However, they commend the Commission for instructing the European Network of Transmission System Operators for Energy (ENTSO-E), to identify crucial requirements for on-shore and off-shore grids, on storage, optimization, and hydrogen infrastructure. 

Despite positive steps, there is a recognized need for stronger filtering of grid connection requests. While the Commission’s call for regulators to discourage connections for weaker projects is praised, wind industry stakeholders suggested that additional guidance for Member States in handling this matter would enhance the effectiveness of the initiative. Moreover, permitting times vary across different technologies, prompting the call for the Commission to guide Member States in securing necessary grid capacity for technologies essential to the industry’s decarbonization goals. 

  b) Solar Industry 

The solar energy industry grapples with significant challenges stemming from a lack of concrete regulatory provisions to facilitate the integration of flexibility across all voltage levels. Furthermore, there is no clear regulatory framework for storage, particularly concerning taxation and the treatment of stored renewable electricity, which is a threat to the growth of flexibility within the sector. 

However, the Action Plan provides valuable guidance on anticipatory investments, offering a strategic approach to bolster the industry’s development. It also includes provisions for mapping available grid capacities and the digitalization of grid connection procedures. These elements play a crucial role in efficiently locating projects and addressing the substantial grid queues prevalent across the European Union. 

Moreover, the legislation introduces common technical requirements for grid connection, a move that is expected to streamline the process for EU inverters. Currently subjected to 27 standardization processes to access EU mandates, this development should improve efficiency and reduce barriers, fostering a more accessible and supportive environment for solar energy projects. As the industry continues to evolve, these regulatory measures play a pivotal role in ensuring a resilient future for solar energy in Europe. 

c) Electric vehicles 

Smart electrification presents unprecedented opportunities for the grid, allowing for dynamic power capacity adjustments in smart electric vehicle charging points and efficient energy storage in heat pumps. However, stronger monitoring during the European Semester is crucial, encompassing investment levels and grid infrastructure performance, measured against lead times, permitting processes, digitalization, and active grid management. 

Reinforcing EU financing, such as the Connecting Europe Facility for Energy (CEF Energy), with regional development funds or the Modernisation Fund, is essential to support critical investments. AVERE, the European Association for Electromobility claims governments should incentivize regulators to modernize grid connection and planning exercises, encouraging regulatory innovations. Anticipatory investments for both capital and operational expenditures, aligned with industry needs and technology roadmaps, including the National Energy and Climate Plans (NECPs), should be a priority. 

Political support is crucial for accelerating investments in the grid, including active grid management. This involves expediting permitting processes for necessary grid components and establishing appropriate price signals for flexible resources like smart inverters, battery or heat storage, smart buildings, heat pumps, and charging stations. These collective efforts are pivotal to unlocking the full potential of the electric vehicle industry in Europe. 

  d) TSOs (Transmission System Operators defined by the European Commission) 

The Action Plan puts forward initiatives to fortify the collaboration between TSOs, emphasizing coordinated onshore and offshore planning. Notably, the legislation acknowledges the indispensable role of transmission and cross-border interconnections, presenting tangible proposals to expedite permitting procedures. This approach extends beyond operational aspects, offering stability and predictability for investors through a meticulously crafted legal and regulatory framework that supports essential grid expansions.  

In tandem with these measures, the legislation advocates for enhanced regulatory drivers, emphasizing the necessity for forward-looking regulations. This includes the formulation of guidelines for anticipatory investments that align regulatory frameworks with evolving energy policies. By championing these initiatives, ENTSO-E aims to ensure the seamless operation of the continent’s intricate electricity grid. 

What does this mean for the industry? 

The EU Action Plan for Grids marks a pivotal step forward in Europe’s pursuit of a clean energy transition. The emphasis on accelerating grid deployment, digitalization, and regulatory incentives is a commendable approach to overcoming obstacles such as permitting delays and outdated infrastructure. As stakeholders engage in discussions and provide feedback, ongoing collaboration, and adjustments will be crucial to ensuring the plan’s effectiveness in fostering a resilient, efficient, and sustainable energy landscape for the future.  

As this legislative journey begins, as a boutique consultancy, Lykke Advice can champion the interests of SMEs within the clean energy sector. We can guide you through the dynamic legislative landscape, ensuring your voices resonate, and ultimately pave the way for a more inclusive and prosperous green energy future for us all. 


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