Electrification is the key to cutting Europe’s dependence on fossil fuels and lowering carbon emissions in transport, heating and industrial activities. While renewable energy has gained a lot of momentum, one piece of the puzzle often overlooked is the electricity grid.
The International Energy Agency estimates that Europe’s annual grid spending will top $70 billion by 2025, double that of a decade ago. Yet grid investments still lag behind renewable deployment. Globally, $400 billion is invested in grids yearly, compared with about $1 trillion in electricity generation. To ensure Europe’s electricity supply meets rising demand, grid spending needs to ramp up quickly.
This lack of investment causes inefficiencies in Europe and beyond. It causes long connection queues and difficulties moving cheap renewable power from where it is produced to where it is consumed. Without massive upgrades, Europe will not be able to offer green and affordable electricity to enough homes and businesses, leaving the green industrial revolution stuck waiting for grid connections.
Forget the old one-way grid
Historically, power grids were designed for one-way electricity flows. Large coal or nuclear power plants generated electricity and sent it to homes and businesses. Today, the grids must handle flows in both directions, integrate intermittent electricity from big wind and solar plants, and connect decentralised electricity producers from smaller rooftop solar installations and community wind farms.
Transmission networks need upgrades to accommodate expanding onshore and offshore renewable projects, to enhance cross-border connections and to implement real-time monitoring. Eurelectric, an association representing many electricity companies, warns that many of Europe’s distribution grids will be more than 40 years old by 2030, putting them close to the end of their lifespan. Distribution networks are also under pressure from rising demand, ageing infrastructure and the growing need for smarts systems that are prepared for climate change.
Make grids more intelligent
Modernising Europe’s grid is not just about building new lines and substations. It requires a comprehensive digital transformation to make the system more intelligent, flexible and secure. This means using digital tools, automation and cybersecurity, alongside physical upgrades, to create a grid with higher capacity, faster response times and improved resilience. But this makes grid investment complex and expensive.
Grid operators, including transmission system operators and distribution system operators, face many challenges. Lengthy permitting processes, public opposition to new projects and the need for costlier underground or subsea cables all slow progress.
At the same time, macroeconomic pressures such as higher interest rates and construction costs make large-scale projects more difficult to finance. Traditional financing models often fall short, especially for newer, grid-related work that involves energy storage or distributed generation, which have higher risks.
Adding to the complexity is the fragmentation in the sector: from large multinational transmission system operators to small municipal distribution system operators, each operates under different national rules. This diversity makes it hard for lenders to apply consistent financing solutions.
More support for grids
The European Investment Bank Group can reduce risk in grid investments and attract private investment. It can blend financing with EU guarantees and offer favourable lending conditions.
The European Investment Bank has a new plan to increase its financing to a record €100 billion in 2025. This will help boost support for clean energy, grid supply chains, cleantech innovation and energy efficiency. The Bank has committed a record €11 billion in new financing for energy grids in 2025, nearly tripling the level in 2023.
Earlier in 2025, in support of the EU Clean Industrial Deal and the Affordable Energy Action Plan, the EIB Group introduced a €1.5 billion package that will provide bank guarantees to European grid component manufacturers. This initiative supports the expansion of supply chains critical for integrating renewable energy and improving energy security. This follows the European Investment Bank’s €5 billion plan announced in 2023 to support European wind turbine companies.
The 2025 grid package targets bottlenecks such as transformers, cables and switchgear to make the grids more resilient. It aims to reduce dependencies on external products and strengthen Europe's supply chain for essential grid components. This will give businesses the long-term certainty needed to increase production and accelerate the development of grid infrastructure across Europe.
Greater access to finance
Recent examples of innovative operations include the Bank’s participation in green hybrid bond issuances by Redeia Corporación in Spain, and its assistance to Tauron and Energa in Poland, contributing to the investment plans of these transmission systems operator companies.
In addition, the Bank is easing access to finance for smaller municipal authorities looking to modernise their grids and other utilities. A pilot Growth for Energy (G4E) initiative provides targeted assistance to countries with more decentralised providers.
Other recent EIB Group projects include:
- Princess Elisabeth Island: The Bank helped finance the world’s first artificial energy island off Belgium’s coast, adding 3.5 GW to Belgium’s electricity grid, enough to power more than three million households.
- Bay of Biscay electricity connection: The Bank pledged €1.6 billion to help build an electricity link between Spain and France that will nearly double electricity exchange capacity. This link also will end the Iberian Peninsula’s isolation from the EU energy market – a major step for regional integration.
Making grid investment a priority
If Europe wants to maintain climate leadership and economic competitiveness, grid investment must be a top policy priority. This means accelerating the permitting process, supporting innovation and introducing more flexible financing models. Energy grids should no longer be treated as supporting infrastructure, but as an essential part of Europe’s green transition.
The second phase of the EIB Group’s Climate Bank Roadmap will outline priorities for the next five years to help make Europe’s green transition a success. Investing in energy grids will be a primary issue in this document.
