Europe’s Grid Reboot: Charging Up for Renewables

Europe’s electrical grid infrastructure, an extensive network of power lines and substations, is a critical component of the continent’s energy system. This vast network ensures the reliable delivery of electricity across borders, supporting both daily life and economic activity. However, much of this infrastructure is aging and struggling to keep pace with contemporary energy demands. 

Current State of EU Electrical Grid

Europe’s current electrical grid, infamous for being the oldest in the world with 40% of the distribution grids more than 40 years old, faces numerous challenges that undermine its capacity to support a sustainable energy future. This aging infrastructure is nearing the end of its 50 year useful lifespan, resulting in significant inefficiencies. Outdated equipment leads to energy loss during transmission, and as the grid continues to age, failures will become more common, increasing the likelihood of power outages.

Furthermore, the grid’s current capacity is ill-equipped to meet the growing demands of a modernizing energy landscape. On top of a projected 60% increase in electricity demand by 2030, the influx of variable renewable sources like wind and solar power creates significant challenges for grid stability. The existing system was not designed to integrate these fluctuating sources effectively, leading to potential bottlenecks and wasted renewable energy. As the EU intensifies its pursuit of the green energy transition in the coming years, the strain on the existing grid will only increase, underscoring the urgent need for comprehensive upgrades.

The EU’s outdated grid currently stands as a roadblock to achieving true energy efficiency and sustainability. Inefficiencies within the system lead to higher overall energy consumption, and limitations in integrating renewables hinder Europe’s ability to tap into newly developed renewable energy sources. Modernizing the grid is essential to effectively integrate renewable energy sources such as wind and solar power into the EU’s energy mix. This transition not only supports Europe’s environmental goals but also ensures a more resilient and efficient energy supply for the future.

Policies Supporting Modernization of Electrical Grid

The EU has recognized this necessity and begun addressing the problem. On November 28th, 2023, the EU Commission launched a comprehensive 14-point action plan for grid modernization. This plan outlines measures to secure €584 billion in funding to upgrade and enhance the EU’s electrical grid infrastructure. With the overarching goal of expanding, digitalizing, and optimizing the use of EU electricity transmission and distribution grids, the EU Commission’s action plan addresses several key aspects of this mission:

 

  • Accelerate the implementation of Projects of Common Interest through political steering and monitoring.
  • Improve long-term grid planning to accommodate renewables and hydrogen.
  • Introduce regulatory incentives for forward-looking investments and cross-border cost sharing.
  • Incentivize better grid usage with enhanced transparency and improved tariffs.
  • Improve access to finance for smart grid projects.
  • Stimulate faster permitting with technical support and stakeholder engagement.
  • Secure grid supply chains by harmonizing manufacturing requirements.

While this action plan promises significant progress in modernizing the EU’s grid network, the necessary upgrades are still years away. Electrical grid upgrades typically take 5-15 years to plan, permit, and complete. Even with expedited processes, Europe will still face an imbalance between production and capacity. In the near term, as the EU grapples with grid modernization and the gap between renewable energy production and grid capacity, it will need to continue relying on fossil fuels.

Role of Liquefied Natural Gas in the Clean Energy Transition

The RePowerEU plan sets a binding target to achieve 42.5% renewables in the EU energy mix by 2030, with an ambition to reach 45%. However, this still leaves over 50% of energy that needs to be met by other sources. As the EU eliminates its reliance on Russian natural gas and reduces the use of dirtier fossil fuels, one fuel source becomes increasingly crucial: Liquefied Natural Gas (LNG). LNG is natural gas cooled to a liquid state, reducing its volume to 1/600th of its original size. This drastic reduction enables more cost-effective and sustainable transportation. Additionally, LNG emits significantly lower carbon emissions compared to coal and oil, making it a cleaner alternative for power generation. With a diverse supply chain including major producers like the USA, Australia, and Qatar, LNG is well-positioned to play a crucial role in the energy transition, serving as a “bridge fuel” while the electrical grid is modernized.

Already, Europe has demonstrated a strong appetite for LNG as a crucial component of its energy transition strategy. Between 2021 and 2023, LNG imports surged from 10% to 42% of total EU gas imports, effectively filling the gap left by reduced pipeline gas supplies from Russia. Recognizing LNG’s critical role, the European Commission is bolstering support for expanding LNG import infrastructure. The EU’s Projects of Common Interest (PCIs) include key infrastructure projects essential for ensuring that all EU countries benefit from LNG. These PCIs designate essential cross-border infrastructure projects that receive streamlined permitting processes and potential funding support. Notably, several PCIs focus on LNG infrastructure development, including new pipelines connecting LNG terminals to existing gas grids within the EU. Additionally, these projects promote the creation of LNG regasification terminals, where LNG can be converted back to its gaseous state after shipping. An added benefit is that these LNG terminals can be easily converted into green energy infrastructure in the future, such as carriers for liquid hydrogen or ammonia, further enhancing their value and flexibility in the transition to a sustainable energy system.

While strong advocates of the green energy transition may adamantly oppose the use of fossil fuels, the instability of the EU’s aging electrical grid poses an even greater threat. Until the grid is modernized to fully support and utilize the growing clean energy production, the EU must continue to rely on fossil fuels to maintain energy system stability. Therefore, it is crucial to strike a balance between advancing renewable energy initiatives and ensuring the reliability of the current energy infrastructure, with LNG serving as a vital bridge in this transitional phase.