The European Commission today estimated that investments of 1.2 billion euros are needed to increase the interconnection of the European Union’s (EU) electrical grids by 2040, as they are “exposed to price volatility and geopolitical risks”.
“The Commission estimates that 1.2 billion euros are needed in the EU’s electricity networks by 2040, including 730 billion euros for distribution networks alone and 240 billion euros for hydrogen networks. Significant investments are therefore needed to ensure that our networks are prepared for the future and achieve climate neutrality by 2050”, indicates the institution in information released to the press in Brussels.
This Wednesday, the 10th, Brussels released a European package on networks to modernize the EU’s energy infrastructure, reduce bills and reinforce independence, proposing greater coordination within the community regarding the planning of the energy system.
Regarding financing, the institution warns that “insufficient integration and underinvestment in energy infrastructures have a direct impact on the energy bills of European citizens”, as the EU “remains too exposed to price volatility and geopolitical risks” due to the fact that almost all oil and gas are imported.
“As network infrastructures are financed mainly through tariffs, this represents a challenge for consumers in the short term, as they have to bear part of the costs. To resolve this issue, Europe is increasing financial support for energy infrastructures as part of its proposal for the next long-term EU budget”, it is noted in the information published today.
The EU’s current long-term budget (2021-2027) already supports energy networks, with the Connecting Europe Facility making €5.8 billion available for cross-border projects.
Within the scope of the Multiannual Financial Framework 2028-2034, under discussion, the European Commission wants a five-fold increase in the funds for this mechanism, from 5.8 billion euros to 29.91 billion euros.
Furthermore, Brussels hopes to count on the European Investment Bank to accelerate the deployment of profitable networks and highlights that “private investments will also have a fundamental role to play”.
The European Networks Package aims to address structural issues in the planning and implementation of EU energy infrastructure and support the completion of the Energy Union.
The package includes proposals to create a more robust process for cross-border energy infrastructure planning, accelerate the granting of licenses, ensure more effective mechanisms for sharing the costs and benefits of cross-border projects, as well as make cross-border infrastructure more resilient and secure.
According to the community executive, “the development of the network can provide real added value and cost savings for Europeans”, as an investment of five billion euros would reduce system costs by eight billion euros, creating a net economic gain of three billion euros, for example.
“Greater market integration could lead to annual cost savings of 40 billion euros, while increasing cross-border electricity trade by 50% could increase annual EU GDP growth by around 18 billion euros by 2030”, Brussels further calculates.
The proposals will now be debated by Parliament (MEPs) and the Council (countries).