Brussels Energy Brief: Funding the energy transition

One of the main challenges of the energy transition is raising the required funding, currently estimated at €660 billion annually from 2026 to 2030 and close to €700 billion annually post 2030 – and significantly up from the estimated €340 billion currently.

All of the plans from the European Commission, such as the recently launched electrification action plan, include actions to advance funding. The Commission itself has multiple funds but these are inadequate for the scale of funding required. Clearly there is a need not only for additional funding sources, i.e. private funding, but also for new funding options as well as new technology approaches that can contain or reduce the required investment levels.

This is the thrust of ENTSO-E’s response to the electrification action plan and welcoming the recognition that electrification must go hand in hand with grid development, offers four recommendations.

These include ensuring that investor attractive remuneration frameworks provide market-based and risk reflective returns and broadening incentives beyond cost efficiency to reward contributions to security of supply, market integration, resilience, grid stability and cybersecurity.

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Flexibility and subsidiarity also should be preserved by allowing national regulators to design tariff structures that reflect local system realities and tailored efficiency measures should be encouraged rather than mandatory one-size-fits-all benchmarking approaches to adequately reflect differences between European transmission systems.  

Not only raising the funding is important but also is its allocation and that there has been underinvestment in the grids has been widely recognised, not least by the Commission in the grids package, which also called for mobilising private investment for grid infrastructure.

Further developments in these areas should become available in the final package but in the meantime in a new position paper E.DSO addresses the role of the future national and regional partnership plans that are being introduced in the cohesion plan for 2028-2034 with the intent to link EU funding to national and regional investment priorities.

E.DSO indicates its key messages are that the plans should identify infrastructure needs early to help member states avoid funding bottlenecks and ensure that the investments can be delivered effectively and on time and that grid investment is a prerequisite to deliver the objectives of the plans.

Congestion, connection delays and curtailment can limit the progress of electrification, renewables and industrial transformation, while at the same time, significant investments are needed to strengthen network capacity, digitalisation, cyber and weather resilience and anticipatory network development. Addressing these needs in the planning framework would help member states align infrastructure planning and improve implementation, states E.DSO.

E.DSO also notes that the current funding of the grids does not reflect the scale of the challenge they are facing and risks undermining the effectiveness of future funding if these needs are not adequately considered.

Also to be highlighted is that the benefits of grid investment extend beyond the individual member state making the investment and they are also contributions to European competitiveness, affordability, security of supply and market integration.

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