On grids, Europe is caught between the future and the past

New grid charging rules can either prop up sagging industry or give Europe the sleek and responsive electricity grid it needs for the electro-state era.

You probably don’t give much thought to electricity grid charges. But soon you will – change is coming to your electricity bill.

Today somewhere between a quarter to a third of your bill covers the costs of building and operating Europe’s electricity network.

But a €1.2 trillion drive to renew and expand Europe’s grids means that investment costs alone are expected to almost double between now and 2050. In return, the energy component of your bill will shrink; thanks to a wave of cheap domestic renewables that will flow more freely throughout Europe.

This means two things.

Firstly, your bills will get cheaper. ENTSO-E found that for every €1.3 invested in grids, generation costs drop by €4.

And secondly, your electricity bill will steadily transform into a de facto grids bill.

And here the European Commission spies an opportunity.

Grid charges to change

Scrambling in response to the latest fossil fuel crisis, the Commission recently announced that it will present new rules on how grid charges are set. The proposal is expected in July.

Its motives are mixed. Firstly, it wants the new rules to incentivise ‘optimal and cost-effective use of the grid infrastructure’ and ‘system-friendly consumption’.

But in the same breath the Commission promises to clarify how national authorities can ‘make targeted reductions to network charges, including for energy-intensive industries’

One path will help give Europe the sleek and responsive electricity system it needs to remain competitive. The other will provide only an expensive band aid for Europe’s tired traditional industries.

How we charge for network use can have a profound impact on the energy system we build for ourselves. A lot of thinking has been done on this already, including by the Commission in its 2025 Guidelines.

Smarter, cost-reflective network charging can give better incentives to producers and consumers to make optimal use of the network we have.  

Tailored charging systems can incentivise system operators to run their grids in smarter, more cost-effective ways, and even to cooperate to build out much-needed interconnector projects.

Most excitingly, smart network charges can help solve one of the energy transition’s most fiendish dilemmas.

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‘Lower bills for everyone’

Electification will ultimately deliver cheaper and more secure energy for industry and households. But the initial necessary investment in grids will be huge. If the entire bill falls on early adopters, this will be both unfair and a harsh brake on Europe’s electrification drive.

But grid charges that are forward-looking and cost reflective, if combined with the Commission’s new anticipatory investment framework and an element of public financing, can ensure that grid investment costs are shared across all grid users – present and future.

So, today’s fixed costs to strengthen the grid can be spread across the multitude of tomorrow’s heat pump owners, EV drivers and turbine operators, who will ultimately use that infrastructure. That means lower bills for everyone.

The alternative path - slashing network charges for energy-intensive industry - is far less exciting. It’s throwing ever more money at a tactic that’s been tried on repeat since 2022 without results. And it would starve Europe of the funds we need to build a grid fit for the electro-era.

It would also be unfair. Lower network charges for industry means higher network charges for everyone else – including the more than 41 million Europeans living in energy poverty.

There is a much smarter way to give relief to industry - energy taxation. The Commission may propose new rules that will require electricity to be taxed at a lower rate than gas. That can help everyone, both industry and households, transition to a far more efficient and secure energy supply.  

Once more Europe faces a choice in its energy transition, between short-term political expediency and longer-term competitiveness. As the Commission embraces a new electrification target, here’s hoping that same long-term thinking is applied to our shared grid infrastructure.

About the author: Donagh Cagney is EU Policy Director at Supergrid Europe – a think-tank focused on the continent-scale planning and delivery of Europe’s electricity grid.