To cut its CO2 emissions and strengthen its energy security, Europe is investing massively in renewable energies like wind and solar power. But the intermittent and weather-dependent supply of electricity from sunshine and wind makes it difficult for grid operators to predict and manage electricity supply and demand.
Reliance on renewables can also make it more difficult for grids to maintain a stable electrical frequency. This poses a risk to their stability, as it makes the system less able to withstand sudden disturbances, like the loss of a large generator, or a sudden drop in wind.
The distribution grid operator in Germany’s Thuringia region, TEAG, is one of many grid companies in Europe investing now to address these bumps in the road to decarbonisation. Known as “the green heart of Germany” for its dense forests, Thuringia generates more than 57% of its electricity from renewables, including 22% from wind.
In April 2024, TEAG signed a €400 million loan with the European Investment Bank under the European Union’s REPowerEU plan to help finance a €600 million investment programme to upgrade its sprawling regional network. It serves 620 municipalities, many of which are small, with only 10 000 to 20 000 inhabitants.
“Inadequate investment in power grids means that they often risk becoming a bottleneck to the expansion of renewable energy and the green transition,” says Lars Anwandter, a European Investment Bank loan officer who worked on the financing. “With the support of the REPowerEU plan, we can finance more than the usual maximum of 50% of such projects.”
A massive increase in renewables
Thanks to the loan, TEAG will be able to double its investments in the electricity grid and employ at least 300 additional staff.
“We expect a massive increase in the need for renewables,” says Mike Karaschinsky, division manager at TEAG. “Germany has gone from a very centralised system based on coal and nuclear power plants located close to consumption centres to a very decentralised system where generation takes place where the weather conditions are best.
“The challenge is to understand where the future flows will take place and which routes will be busiest.”
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As part of the investment programme, new power cables and overhead lines of all voltages will be installed, and others will be replaced. Substations will also need to be built, and modern network components will be required for automated and digital dispatching. The investment is necessary to upgrade the grid to connect more decentralised producers and users of solar and wind power, among them consumers who want to connect solar-panels, heat pumps and wall boxes to benefit from the digital transformation.
“With the increase in electromobility, with car batteries and charging systems that can feed back into the network, we need to invest in a much more intelligent network,” says Karaschinsky.
From bottleneck to enabler
Between 2013 and 2023, the European Investment Bank has lent over €30 billion to support grid upgrades in the European Union worth more than €74 billion. But if grids are to become an enabler of the green transition rather than a bottleneck, much more needs to be done.
In its November 2023 communication "An EU action plan for grids”, the European Commission said that permit procedures for grid reinforcements currently take four to 10 years for new, high-voltage lines. This would need to be dramatically shortened to keep the green transition on track.
In total, the Commission estimates €584 billion in investments will be necessary for electricity grids by 2030, with the majority going into local distribution networks to make them “digital, monitored in real-time, remotely controllable and cybersecure”.
To help ease the situation, the Commission has proposed a 14-point action plan to improve the long-term planning of grids, accelerate permit procedures, and improve access to finance for grid projects – both at the transmission and distribution level.
Better integration between national networks could also improve efficiency and potentially cut fuel use by as much as 21%, according to the Bruegel think tank.
Legislative changes are also vital.
In March 2023 the European Commission proposed a sweeping reform of the EU electricity market, which aims to reduce price volatility for consumers and create more favourable conditions for investors in low-carbon energy and energy storage solutions.
