Europe’s competitiveness depends on electricity grids

Europe’s competitiveness, decarbonisation and energy security ambitions will stand or fall on the strength of its electricity grids.

Electricity is becoming the backbone of Europe’s economy, with electrification at the forefront of the energy agenda. Demand is growing across the board: homes are increasingly heated by electricity rather than fossil fuels. Transport is electrifying. Industry is shifting towards cleaner power sources. At the same time, data centres, artificial intelligence and advanced manufacturing are creating entirely new sources of demand: globally, data centres are expected to more than double their electricity consumption by 2030.

The International Energy Agency (IEA) has described this period as the “Age of Electricity”, and Europe is entering it at full speed.

But electricity only helps if it can reach homes, businesses and factories when and where it is needed. Today, Europe’s grids are struggling to keep pace.

Plenty of clean power, too few connections

The challenge is no longer simply generating enough clean power. Europe has made enormous progress in renewable energy deployment.

Last year, Europe installed more than 80 gigawatts of renewable capacity. But six times that amount is waiting to be connected. Without stronger grids, we cannot make full use of the clean energy we are building.

Renewables and nuclear now generate over 70% of the EU’s electricity, reducing dependence on imported fossil fuels and strengthening energy security. Wind and solar power are increasingly the cheapest sources of new electricity generation. Yet grid bottlenecks are slowing the connection of renewable projects, delaying industrial investment and increasing costs for businesses and consumers.

The economic consequences are already visible. According to the IEA, grid congestion across the EU cost an estimated €4.3bn in 2024. Delays in connecting renewable energy projects, battery storage facilities and new industrial sites are becoming increasingly common. In many regions, access to grid capacity is emerging as one of the most important factors influencing investment decisions.

This is not just an energy challenge. It is a competitiveness challenge.

Where grids go, investment follows

European industry depends on reliable, affordable and clean electricity. Whether it is steel, chemicals, semiconductors, electric mobility, hydrogen production or data-driven industries, access to modern electricity infrastructure increasingly determines where companies choose to invest. Grid capacity is becoming a key ingredient of Europe’s industrial strategy.

Electricity networks are strategic infrastructure, as important to Europe’s future prosperity as transport corridors, ports and digital networks.

Much of Europe’s electricity network was designed for a different era, when power flowed from large, centralised plants to passive consumers. Today’s energy system is far more dynamic. Renewable generation is often located far from industrial demand centres and embedded in distribution networks. Millions of household consumers have also become producers through rooftop solar systems. Electric vehicles, batteries and digital technologies are creating increasingly complex patterns of supply and demand.

Modern grids must be capable of managing this new reality.

This requires continuous investment in new transmission lines, distribution networks, substations and cross-border interconnections. It also requires investment in digitalisation, automation, smart meters and advanced monitoring systems that allow operators to make better use of existing infrastructure.

The choice is not between building new infrastructure and making networks smarter. Europe must do both.

Transformation all over Europe

The European Investment Bank (EIB) Group is helping to finance this transformation. In 2025, the Group provided a record €33bn in financing for Europe’s energy security, including €11.6bn in grids and storage, helping support around half of total grid and interconnector investment across the European Union. The projects financed are supporting around fifty-six thousand kilometres of new cables, more than the circumference of the Earth.

One example is the Bay of Biscay electricity interconnector between Spain and France. Supported by €1.6bn in EIB financing, the project will double power flows between the two countries. This will strengthen the integration of the Iberian Peninsula into the wider European electricity market and allow Spain to share its abundant solar energy across Europe.

In Belgium, the EIB is supporting the Princess Elisabeth Island, the world’s first artificial energy island. Built 45 kilometres offshore, it will bring together electricity from new wind farms and channel it to the mainland, unlocking 3.5 GW of additional offshore wind capacity, enough to power more than 3 million households.

In Greece, new connections between islands and the mainland transmission network are helping replace polluting oil-based generation with cleaner and more affordable renewable electricity, with support from the EIB.

More recently, the EIB and Crédit Agricole CIB announced a guarantee agreement to support European manufacturers of electricity grid components as demand accelerates with the energy transition. The agreement forms part of the EIB’s wider initiatives to support the implementation of the EU Energy Grids Package.

The coming decade will be decisive. Europe has already demonstrated that it can accelerate renewable energy deployment and attract investment into clean technologies. The next phase is about building the infrastructure to power large-scale electrification and make Europe’s clean energy system work.

If Europe wants to remain competitive, secure and prosperous in the ‘Age of Electricity’, grids can no longer be an afterthought. They must become a strategic priority.

This article is a contribution from a member or partner organisation of Friends of Europe. The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.