Europe’s need for green electricity is blowing fuses

The continent has largely exhausted its fossil fuels and has banned Russian gas. That leaves renewables, which require fixing the grids.

DELFT UNIVERSITY’S Electrical Sustainable Power Lab occupies a 25-metre-tall peak-roofed shed, a cross between a hayloft and an aeroplane hangar, not far from where Vermeer painted his celebrated view of the city. The inside has a Frankenstein feel: arrays of corona rings on poles, a multistorey stack of power cells that can simulate lightning. The supercomputer is upstairs, inside a Faraday cage that insulates it from magnetic fields (a wise precaution when there is mock lightning about). But the most unusual thing at the lab is the software running on that supercomputer: a virtual model of a high-voltage electric grid, with all of its power plants, transmission lines and substations.

Representational photo.(Representational Image / REUTERS)

The model, one of the most sophisticated in Europe, is known as a “digital twin”. “For 150 years electrical engineers were trying to predict grid responses using differential equations,” says Peter Palensky, the lab’s head. Now they can experiment with a mock-up based on real-world data. An unexpected change can ripple out and cause a blackout, as happened in 2022 when Russian hackers inserted malware into circuit-breakers in Ukraine, or last April when frequency disturbances crashed the grids in Spain and Portugal.

Beyond preparing for calamities, digital twins have a broader mission: understanding the complexity of modern grids. Cars, homes and industries are switching from fossil fuels to electricity, and data centres’ thirst for kilowatt-hours is insatiable. Renewable power sources such as solar and wind are intermittent; they may supply too much or too little at a given time. So grids need to shuffle huge amounts of current all over Europe, shutting down overloaded nodes or using batteries to store charge.

All this requires enormous upgrades. Local electricity suppliers, or distribution system operators (DSOs), have long queues of businesses waiting to be connected. Transmission system operators (TSOs), which run the regional or countrywide grids that bring power to DSOs, are frantically building high-tension lines, substations and interconnectors between countries. Italy’s national grid operator, Terna, is investing €18bn ($21bn) in 2024-28. France’s RTE plans to invest €100bn between 2025 and 2040. TenneT, the sole TSO in the Netherlands and the biggest in Germany, plans to spend a whopping €200bn by 2034. ENTSO-E, the European TSO regulator, estimates the total amount needed to meet the European Union’s electrification goals by 2050 at a staggering €800bn.

The economic implications are stark. Last year’s report on the EU’s competitiveness problems written by Mario Draghi, a former governor of the European Central Bank and Italian prime minister, started its recommendations with energy costs. Electricity prices in Europe are typically two to three times those in America. The continent has largely exhausted its fossil fuels and has banned Russian gas. That leaves renewables, which require fixing the grids.

One measure of the challenge is the backlog in hook-ups. Italy’s national renewable-energy plan envisaged 65 gigawatts (GW) worth of capacity by 2030. In fact the country already has 350 GW-worth of applications. In the Dutch grid, congestion at one point led the government to block permits for non-residential connections. In Germany 500 GW-worth of battery projects have applied for connections, more than 20 times the current capacity. (Not all are serious: the country’s first-come, first-served rule for electric hook-ups encourages entrepreneurs to file speculative applications and sit on them.)

Another is the increasing frequency of negative prices in electricity markets. When supply exceeds demand, whether because of a lack of storage or an inability to get current to where it is needed, many grid operators pay consumers to take their power. In 2024 Germany had negative prices 5% of the time, up from 3% in 2023 (though nowhere near the 25% rate in parts of Australia). In the first eight months of this year that rose to 10%. “The market is screaming for capacity,” says Michael Waldner, CEO of Pexapark, a Zurich-based renewable energy consultancy.

Volatile markets do, however, incentivise entrepreneurs to build storage. Battery operators earn money by taking power from the grid when prices are low and selling it back when they rise. Such arbitrage is one reason for Europe’s battery boom: grids added a record 8.8 GW-hours of storage in 2024, ten times as much as in 2020.

Yet if batteries are built willy-nilly wherever land is cheap, they add headaches for grid operators who must connect and send them power over congested lines. “They exacerbate the flow problems,” says Vera Brenzel, policy director at TenneT. Governments should require that battery entrepreneurs build close to renewable power sources, she argues.

Some of Europe’s problems are the same ones arising everywhere. For example, renewable energy sources do not naturally supply “system inertia”, the tendency of traditional generators to resist frequency deviations because they are powered by heavy turbines spinning at a constant rate. Hence modern grids need electronic devices to create synthetic inertia. Renewables are also less able to supply reactive power, the unconsumed power needed simply to keep current moving.

But other challenges are about regulation, not technology. In theory, it is in Europeans’ interests to have seamless markets that link power-rich places (Scandinavia with its hydroelectric dams) with power-hungry ones (southern Germany’s factories). But countries with cheap, stable power often worry that linking to their neighbours will raise domestic prices.

Indeed, an evaluation by ENTSO-E found that permitting delays are the most important barrier to grid upgrades. One interconnector project between Italy and Slovenia has been authorised on the Italian side since 2012 but is only now finishing the permitting process; on the Slovenian side it is still under consideration. To speed up permitting in Italy, last summer the grid operator introduced a new system that breaks the country into “microzones”; those that issue permits faster will get priority for connections.

The grid’s cross-border nature makes it a logical job for the EU. The bloc’s next seven-year budget proposes to raise its spending on grids to over €30bn, from €5.8bn in the previous seven years. But ultimately, whether Europe can lower its electricity costs quickly enough to stay competitive depends on how fast its industry can build power lines, batteries and substations.

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