The distribution grid operator in Germany’s Thuringia region, TEAG, is one of many in Europe investing now to address these bumps in the road to decarbonisation. Known as “the green heart of Germany” for its dense forests, Thuringia generates more than 57% of its electricity from renewables, including 22.4% from wind.
In April 2024, TEAG signed a €400 million loan with the European Investment Bank to help finance a €600 million investment programme to upgrade its sprawling regional network. It serves 620 municipalities, many of which are small, with only 10 000 to 20 000 inhabitants.
“We expect a massive increase in the need for renewables,” says Mike Karaschinsky, division manager at TEAG. “Germany has gone from a very centralised system based on coal and nuclear power plants located close to consumption centres to a very decentralised system where generation takes place where the weather conditions are best. The challenge is to understand where the future flows will take place and which routes will be busiest.”
In addition to new, durable, high-capacity cables and sub-stations, the regional distribution network operator is also investing heavily in digital technologies, including smart meters and IT security.
“With the increase in electromobility, with car batteries and charging systems that can feed back into the network, we need to invest in a much more intelligent network,” says Karaschinsky.
Between 2013 and 2023, the European Investment Bank has lent over €30 billion to support grid upgrades in the European Union worth more than €74 billion. But if grids are to become an enabler of the green transition rather than a bottleneck, much more needs to be done.
In its November 2023 communication "An EU action plan for grids”, the European Commission said that permit procedures for grid reinforcements currently take 4 to 10 years and even as long as 10 years for new, high-voltage lines. This would need to be dramatically shortened to keep the green transition on track.
In total, the Commission estimates €584 billion in investments will be necessary for electricity grids by 2030, with the majority going into local distribution networks to make them “digital, monitored in real-time, remotely controllable and cybersecure”.
To help ease the situation, the Commission has proposed a 14-point action plan to improve the long-term planning of grids, accelerate permit procedures, and improve access to finance for grid projects – both at the transmission and distribution level.
Better integration between national networks could also improve efficiency and potentially cut fuel use by as much as 21%, according to the Bruegel think tank.
Legislative changes are also vital. In March 2023 the European Commission proposed a sweeping reform of the EU electricity market, which aims to reduce price volatility for consumers and create more favourable conditions for investors in low-carbon energy and energy storage solutions.