The challenges of European electrification
Valentin Vigier, Head of Responsible Investment Research, LFDE |
The blackout on 28 April in Spain and Portugal breathed new life into debates about Europe’s energy transition. Whilst the massive power outage caused a renewed upsurge in accusations by some that renewable energies are responsible for an imbalance in electricity production and demand due to their volatile nature, the conclusions of the investigation have not, as yet, confirmed the cause of the problem. Yet this event served as a strong reminder of the urgent requirement for a resilient and well-managed electricity grid as the key to energy security in Europe. Financing this must be a priority.
Need for electrification
European electrification is indispensable for the success of the continent’s energy transition strategy aimed at combatting global warming. It is also a matter of sovereignty, given Europe’s dependence on massive imports of fossil fuels. On 6 May, the European Commission announced its intention to stop the import of Russian gas – 19% of gas consumption in 2024 – by the end of 2027. Electrification is imperative if Europe is to avoid replacing one dependence by another, for example, on US liquified natural gas (LNG).
Achieving the electrification scenario of the International Energy Agency is an enormous challenge. It would mean raising the share of electricity from around 23% of energy demand in 2022 to 57% in 2050, and increasing the share of renewable energies in the electricity mix from 42% to 90% by 2040[1].
Investment in the grid is required
Europe has an ageing electricity grid. Close to 40% of the 11.3 million kilometres of distribution lines are more than 40 years old. This grid therefore requires renovation and expansion to absorb the massive rise in electrification planned for the future, with electric vehicles, heat pumps and industrial requirements, etc. In its Review, the European Court of Auditors forecasts a 60% increase in consumption at peak times by 2050. It anticipates that considerable investment will be required in the 27 countries of the European Union, totalling EUR 1,871 billion by 2050.
This modernisation must go hand-in-hand with stronger interconnections between countries in order to manage fluctuations and generate savings of several billions of euros per year. For example, the Biscay Gulf project between the French and Spanish grids should make it possible to double the electricity exchange capacity and avoid the loss of 7,430 GWh/year of green electricity, according to France’s transmissions system operator, RTE. Electricity storage systems are also essential, with the roll-out of intelligent meters to smooth demand peaks and ‘prosumers’ – consumers who produce their own electricity.
In response to these challenges, we are convinced of the necessity of supporting the grid companies, which are key to this transformation. One such example is German group E.ON, one of the main grid operators in Europe, which has announced a EUR 42 billion investment programme to modernise Europe’s energy infrastructure by 2028. LFDE also invests in Elia, a grid operator in Belgium, which is working on cross-border interconnections to facilitate the exchange of electricity between countries. It plays a crucial role in the development of offshore projects aimed at connecting offshore wind farms with onshore networks. Another example is National Grid in the United Kingdom, which is developing infrastructure and solutions to integrate more renewable energies and improve the resilience of the network with continental Europe.
Transition is the endeavour of the century. Investing for the future in this area addresses far-reaching challenges.