EU Grid Push Aims to Cut Costs, Boost Renewables With €40B Annual Savings

The European Union's Grid Expansion: A Critical Energy Initiative

The European Union is preparing to accelerate the development of cross-border power grid connections to address soaring energy bills and improve the efficiency of its electricity networks. A draft document seen by Bloomberg News reveals that the European Commission is planning to fast-track the Energy Highways project, which aims to reduce reliance on imported fossil fuels and boost renewable energy integration. Without significant investment, the EU risks missing key transmission capacity targets by 2030, which could lead to higher costs and energy waste.

The Commission's draft highlights that years of underinvestment and fragmented planning have left the EU's electricity system unable to manage the rapid growth in renewable energy. As a result, wind and solar power is often wasted because it cannot be transmitted to areas of high demand, forcing countries to fall back on more expensive fossil fuel plants. This inefficiency has driven electricity prices in the EU to more than double those in the US and China.

To address the problem, the Commission is pushing for the expansion of eight cross-border electricity projects, which could generate €40 billion in annual savings and boost the region's economy by €18 billion by 2030. These projects are part of a broader effort to modernize the EU's grid infrastructure and increase the use of clean energy. The Commission's plan also aims to attract more investment in data centers and artificial intelligence, sectors that are expected to play a major role in the EU's future energy demand.

Why the Grid Expansion Is Critical

The EU's power system is struggling to keep up with the shift to renewable energy, a problem exacerbated by a lack of cross-border grid connections. As wind and solar generation increases, many countries are unable to transmit surplus power to regions where demand is high, resulting in curtailment - a practice where excess renewable energy is intentionally cut off from the grid to prevent overloads. This not only wastes clean power but also adds to energy costs, as consumers are forced to pay for the lost output.

Without action, the EU is projected to fall short of 45% of the cross-border transmission capacity it needs by 2030. This shortfall could lead to the curtailment of up to 310 terawatt-hours of renewable electricity by 2040 - nearly half of the EU's current annual power consumption. The problem is particularly acute in countries like Spain and Portugal, where interconnection levels remain low, isolating their grids from the rest of Europe and limiting their ability to export renewable energy.

Funding and Policy Challenges

Despite the clear need for investment, funding for cross-border electricity projects remains a major challenge. The EU's Connecting Europe Facility for Energy (CEF-E) has allocated €17 billion in grants for the 2028–2034 period, but this is far short of the €47 billion needed to support the most cost-effective grid expansion according to analysis. Additional financing will have to come from EU loans, private investors, and other sources to bridge the gap and ensure that the region's electricity infrastructure meets its long-term goals.

The EU's Grids Package, a key policy initiative, aims to modernize and expand the continent's electricity networks. It sets a target of 15% interconnection by 2030, meaning that countries must be able to export 15% of their electricity to neighboring nations. However, 11 member states - including Germany, Italy, and Poland - are expected to fall below this threshold, limiting their access to cleaner and cheaper power from other parts of Europe. These countries are also among the largest generators of wind and solar, making their underperformance in grid development a particular concern.

What This Means for Investors

The urgency of the grid expansion effort is creating new opportunities for investors in the energy infrastructure sector. With the EU planning to nearly double its interconnection capacity between 2030 and 2040, there is significant potential for firms involved in grid development, project financing, and energy storage. Public and private investment is expected to grow, particularly in countries that are lagging behind on their interconnection targets. Investors should also monitor how the EU allocates its funding through the CEF-E and other financial mechanisms, as these decisions will shape the future of cross-border power projects.

At the same time, the high cost of grid expansion and the need for long-term planning could create risks for investors. Delays in project approvals, regulatory hurdles, and environmental concerns may slow down the development of new interconnectors. Additionally, the current high interest rate environment is making it harder for grid operators to secure financing, which could lead to higher electricity costs for consumers and businesses according to experts. The success of the EU's grid modernization efforts will depend on how well these challenges are managed.