EU Countries Seek Increased Power Grid Funding to Meet Green Energy Goals

EU countries will seek more power grid funding at the May 30 energy ministers' meeting to support the EU's green energy goals. The EU estimates €584 billion per year in investments is needed to achieve its clean energy targets.

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Nitish Verma
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EU Countries Seek Increased Power Grid Funding to Meet Green Energy Goals

EU Countries Seek Increased Power Grid Funding to Meet Green Energy Goals

European Union countries, seek, power, grid, funding to support the EU's ambitious green energy goals at the upcoming energy ministers' meeting on May 30. The EU estimates that a staggering €584 billion per year in investments is needed to achieve its clean energy targets, but current investments in power grids lag far behind this figure.

Why this matters: The successful integration of renewable energy sources into the power grid is crucial for reducing carbon emissions and mitigating climate change. Failure to invest in grid infrastructure could hinder the EU's ability to meet its green energy goals, leading to continued reliance on fossil fuels and exacerbating environmental degradation.

The rapid adoption of clean energy technologies, such as solar, wind, and hydropower, is crucial for decarbonizing energy systems and limiting global warming. However, these technologies are inherently intermittent and have fluctuating features, which can destabilize the grid. Battery Energy Storage Systems are seen as a key solution to address these challenges, but their adoption is currently low and growing at a slower rate than desired.

According to the International Energy Agency (IEA), global BESS capacity needs to reach 1200 GW by 2030 to enable seamless grid integration of renewable energy with a net-zero 2050 emissions scenario. However, the current estimate is that BESS capacity will only reach around 760 GW by 2030, significantly less than the required amount.

Financial risks attributed to novel technology and the absence of a secured financial model are major challenges to the adoption of BESS. Technological risks, such as performance and warranty issues, also need to be addressed. The large-scale adoption of BESS requires the active participation of low-risk, low-cost capital providers, such as banks, pension funds, and insurance companies.

Multilateral development banks (MDBs) and Development Financial Institutions (DFIs) can play a crucial role in mitigating investment risks and creating an impact multiplier effect. Blended financing models, such as using public capital as a first-loss capital or guarantee for BESS projects, can help crowd in private investors. Independent BESS projects can be bundled together and issued as green bonds to attract large investors. Partial credit guarantees (PCGs) can be provided by public capital providers to improve the credit ratings of green bonds.

Kristian Ruby, secretary general of industry group Eurelectric, emphasized the need to speed up investments and avoid a situation where newly-built green energy projects have to wait years to be connected to ailing power networks. "We need to make sure that there is an active incentive for the grid operators to make use of public funds," he said.

EU countries will ask the European Commission to assess current EU funds available for power grids and produce guidance on how to use more EU funds for grid projects. The European Investment Bank is also being called upon to strengthen its support for power grid projects, including by de-risking projects to attract private finance. The EU has added dozens of power grid projects to a list of schemes eligible for fast-tracked permits and certain EU funds.

The EU's plans to shift to clean energy require a huge expansion of power grids, transforming the network to connect consumers to massive new offshore wind farms, fleets of local solar panels, and install millions of charging stations for electric vehicles. Ageing electricity infrastructure could hamper Europe's green goals if not addressed. More than 35,000 power plants requested new connections to Austria's power grid in 2022, a threefold increase from 2021, with most requests coming from solar plants.

As the EU energy ministers convene on May 30 to discuss the critical issue of power grid funding, the outcome of their meeting will have significant implications for Europe's clean energy transition. With the right investments, incentives, and risk mitigation measures in place, the EU can accelerate the adoption of renewable energy technologies and battery storage systems, paving the way for a sustainable and decarbonized future.

Key Takeaways

  • EU countries seek more power grid funding to support green energy goals.
  • €584 billion/year in investments needed to achieve EU's clean energy targets.
  • Battery Energy Storage Systems (BESS) crucial for seamless grid integration.
  • Global BESS capacity needs to reach 1200 GW by 2030 for net-zero emissions.
  • Multilateral development banks can help mitigate investment risks for BESS.