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EU Invests Heavily In Building Modern Power Grid

The European Union is investing heavily in the construction of a modern electricity grid, recognizing it as a pivotal element in both the stability of the internal energy market and the indispensable transition towards green energy. In the recently released "EU Grid Construction Action Plan," the European Commission unequivocally states that the European power grid must progress towards being "smarter, more decentralized, and more flexible." To achieve this goal, the EU plans to invest €584 billion by 2030 to modernize the grid.

This initiative reflects concerns within the energy sector about the increasingly aggravated progress lag in European grid construction. Analysis commonly acknowledges that the EU's current grid is too small, relatively outdated, overly centralized, and insufficiently interconnected, facing numerous challenges.

Firstly, aging transmission and distribution networks are unable to meet the escalating electricity consumption demand. Projections indicate that by 2030, EU electricity consumption will increase by approximately 60% compared to current levels. Yet, around 40% of Europe's distribution networks have been in use for over 40 years, with less than a decade remaining before reaching the end of their designed lifespan. Aging grids not only lose efficiency in power transmission but also pose potential safety hazards.

Secondly, the growth momentum of renewable energy supply and demand poses a challenge to existing network structures. Millions of newly installed rooftop solar panels, heat pumps, and local energy community shared resources urgently require grid access. Meanwhile, the increasing demand for electric vehicle charging and hydrogen production necessitates more flexible and advanced grid systems.

Additionally, cumbersome regulatory processes have left many power producers frustrated. The plan notes that in many countries, renewable energy generation projects require lengthy waiting periods to obtain grid access. The Chief Executive Officer of E.ON, Leonhard Birnbaum, lamented, "As Germany's largest utility company, E.ON's grid connection applications have also fallen on deaf ears."

Moreover, the growing intra-EU electricity trading poses higher requirements for interconnection among member states' grids. The European Leadership Network pointed out in a report that when a member state faces electricity shortages, it can import energy from other countries, thereby enhancing the energy resilience of the entire continent. For instance, during the extreme heatwave in the summer of 2022, France experienced a decrease in domestic nuclear power generation and increased electricity imports from the UK, Spain, Germany, and Belgium to meet domestic demand. According to the European Network of Transmission System Operators for Electricity calculations, cross-border transmission infrastructure in the EU should double over the next seven years, with an additional capacity of 23 gigawatts by 2025, and a further increase of 64 gigawatts by 2030.

To address these pressing challenges, the EU identifies seven key areas of focus in the plan, including accelerating the implementation of existing projects and developing new ones, strengthening long-term network planning, introducing forward-looking regulatory frameworks, enhancing grid intelligence levels, broadening financing channels, streamlining permit approval processes, and improving supply chain strengthening. The plan outlines specific action proposals for each of these areas.

For example, the plan discusses offshore renewable energy projects in the section on forward-looking regulatory policies. While recognizing the significant benefits of connecting energy islands and other large offshore projects, the plan highlights the need for cost-sharing agreements due to the potential cross-border nature of these projects and the requirement to increase transmission infrastructure from European coastal areas to inland regions. Given the uncertain investment prospects for such projects, it is deemed necessary for all parties to reach a consensus on appropriate cost-sharing arrangements. Therefore, the European Commission will issue guidelines on cross-border cost-sharing for offshore projects, guiding regulatory authorities in member states to engage in cooperative discussions on principles of collaboration during the stage of determining network requirements to expedite the implementation of new cross-border projects.

Giles Dickson, CEO of the European Wind Energy Association, views the introduction of this plan by the European Commission as a "wise move," indicating that it signifies the Commission's recognition that massive investments in the grid are essential for achieving the energy transition. Dickson commends the plan's emphasis on standardizing grid supply chain standards: "Transmission system operators need clear incentives to procure standardized equipment."

At the same time, Dickson emphasizes the need for urgent action, particularly in addressing the queueing issue for renewable energy projects applying for grid connection. Dickson suggests prioritizing projects that are the most mature, strategic, and likely to be completed, to avoid "letting speculative projects derail progress." Dickson also calls on European public banks, such as the European Investment Bank, to provide counter-guarantees for large infrastructure projects.

(Source: Economic Daily)


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