Megaproject

Smart Energy International

Managing The Step-Up In European Distribution Network InvestmentsIn this week’s Power Playbook: European network investment needs take the stage. In the UK, it is anticipated to double by 2050 and analysis in the EU indicates it will grow to €1.4 trillion ($1.5 trillion) by 2040. The last few weeks have been crucial for understanding the investment needs of European distribution networks. We’ve long known the numbers needed for decarbonised power grids, but new analyses in the UK and the EU are showing that these numbers are only going to increase. This is an intimidating prospect considering the large volume of cash flow that was needed in the first place. Let’s start with the EU. According to reportage from Brussels correspondent Jonathan Spencer Jones, analysis from the European Commission shows that planned investment needs in the EU’s energy infrastructure are expected to grow to over €1.4 trillion from 2024 to 2040. The vast majority of this is due to be directed towards electricity infrastructure, with electricity distribution accounting for the lion’s share, at €730 billion ($764.7 billion). Over in the UK, analysis from the country’s National Infrastructure Commission (NIC) found that, with power demand expected to double in the country by 2050, so too would additional investment in the distribution networks need to double. More from the Power Playbook:Europe’s e-mobility market: Flexibility monetisation and a regulatory action planE.ON, EDF and Endesa earnings show impact of policy and pricing on bottom line The numbers are nothing to scoff at and what they raise is an important question – we know what we need to raise, but how do we raise it? As I covered in December last year, Europe seems to have the capital available to finance its net zero ambitions. It is in its allocation that the problem arises, brought on by the age-old issue of investors not having a risk appetite, an ineffective capital allocation model, and the fragmented nature of the European capital market. However, the Commission in their analysis does point out public funding options available. They say that public funding, especially EU financial support, is considered to play a pivotal role in de-risking large, capital-intensive projects. The type of financing can be in the form of grants, EU-backed loans and guarantees or equity. Mechanisms similar to the Connecting Europe Facility for energy for cross-border investments and the modernisation and innovation funds also are expected to play an important role. EU financial support also can play a role in cases where the returns on infrastructure investments are regulated by national regulatory authorities, for example involving TSOs and DSOs. Beyond such measures, there is increasing discussion of the role of anticipatory investments, i.e. those that stem from a process aimed at identifying and executing investments that proactively address expected developments. Some examples of potential DSO project categories for anticipatory investments, as covered in Enlit’s Energy Briefs, include preparing for future capacity increases, investing with higher capacity assets, adding additional assets to the grid and reinforcing the resilience of power networks. A shift away from the traditional approach towards utility investments, making way for such investments requires the adaptation of regulatory frameworks. Since DSOs seem keen, it will be something to keep an eye on. In the UK, there is the RIIO (Revenue = Incentives + Innovation + Outputs) Framework, managed by Ofgem, the Office of Gas and Electricity Markets through mechanisms like the Strategic Innovation Fund (SIF) and the Network Innovation Allowance (NIA). To get more insights into RIIO and the NIC’s report, I spoke to Mark Sprawson, Commercial Director of VisNet, which helped contribute to the report’s analysis. Sprawson, a firm advocate of RIIO, calls it “arguably the most progressive kind of regulatory framework we’ve seen globally.” But it is not without its challenges. Said Sprawson: “One challenge that any regulatory framework has is the time scale over which it operates. When it comes to the RIIO framework and the regulatory period windows, we have ED2 (Electricity Distribution 2), which we’re in now, it’s a five-year window, and then we’ll move to another five year window for ED3. “What any regulator, be it Ofgem or anyone else around the world, needs to consider is, how do they ensure that they drive the right behaviours and right incentives to deliver for the long-term goal around achieving net zero. Because that’s what we’re all striving for, right? “There needs to be some acknowledgement of ensuring that returns on investment are fair and equitable and drive the right behaviours, but also that there’s a fair mechanism between actually investing in network infrastructure and investing in those digital solutions, new technologies, that show that you don’t need to do some of this other investment piece.” According to Sprawson, when it comes to realistically thinking about whether the investment can be generated, it comes down to two questions: “What are you investing in and when? “The answer isn’t to overlay cables with bigger cables – the societal disruption and the cost will be prohibitive. Instead, it needs to be a suite of solutions, thinking about how to use technology better to understand where the latest capacity in the system is and where are the pinch points. And how do we therefore optimise those investment decisions based on that analysis?” Sprawson says this needs to come down to a three-step process. First is using modelling techniques already present across the networks, interpolating between them for data that would be 70 to 80% accurate. “That’ll give an indication of where the pain will be felt in terms of growth.” Second is using that detailed modelling to see where tech can be deployed alongside smart meters, “allowing for monitoring on a sub-second level of what’s going on in the network and understanding the risk that is posed to customers. “The third step is then determining the intervention, which could be through a flexibility market, if it’s a short-term issue, versus if it’s a long-term trend that shows there’s some real growth in need of an intervention with an actual upgrade of the network in that area.” This idea of minimising investment needs through flexibility is not necessarily new. Indeed, using smart tech assets connected to the grid flexibility has long been a talking point on how to balance the supply demand curve and bring down the spend needed. Just take the report launched last week by Eurelectric, which finds that smart and bidirectional charging alone, if used through flexibility, could benefit DSOs with a projected €4 billion ($4.3 billion) in savings annually. But the numbers are not yet at a level where we can rely on flexibility completely. LCP Delta and smartEN in their latest Market Monitor for Demand Side Flexibility, although listing the UK and France as leaders in the flexibility space, warned of a growing need to maximise the participation and value of demand side flexibility (DSF) assets across different value streams. I.e. in Europe, it’s not happening fast enough. This is all to say: more is needed. More cash flow into the grid, more access to demand-side flexibility and more initiative to smartly think about optimising investments. But what do you think? How best can we generate and stimulate investments for the crucial projects needed to decarbonise the grid? Reach out and let me know so I can feature your inisghts in the Power Playbook. Cheers,Yusuf LatiefContent ProducerSmart Energy International Follow me on LinkedIn

powerplant

Mar 14, 2025

Smart Energy International

European Commission Shifts Gears To Support E-Mobility InfrastructureThe European Commission looks set to support the growth in electric vehicles (EVs) and charging points by making it easier to build power connections from chargers to grids, and by giving such projects priority writes Vic Wyman. The idea was floated in the Commission’s action plan for the automotive sector, unveiled on 5 March 2025, along with ideas for boosting the EU battery sector to meet expected demand from EV makers. For the EU, the automotive sector needs to thrive — “It accounts for €1 trillion in GDP, a third of private research and development investment in the EU and it provides direct and indirect employment to 13 million Europeans,” said the action plan. The plan also claimed that the EU’s Alternative Fuels Infrastructure Facility (AFIF) has effectively and efficiently supported the building of recharging and hydrogen refuelling infrastructure. €570 million has been allocated for projects in 2025 and 2026, focusing on heavy-duty vehicles. And in its Sustainable Transport Investment Plan, to be adopted this year, the Commission will remove barriers to financing for recharging infrastructure, according to the action plan. Chris Heron, the secretary general of the E-Mobility Europe trade association, told Enlit that he was cautiously optimistic that the EV battery and charger market could fulfil its promise. He claimed that there were already enough public chargers for EVs on the roads, with 26 of the 27 EU countries having met the EU’s targets: “The idea that we don’t have enough charging is nonsense.” He also welcomed the possible prioritisation of grid connections for chargers. Have you read?Europe’s e-mobility market: Flexibility monetisation and a regulatory action planHow to stimulate Europe’s bidirectional charging market However, Jaap Burger, senior adviser and consultant at the Regulatory Assistance Project, said: “One of the key features of smart chargers is dynamic pricing.” And although there has been a four-fold increase in smart electricity tariffs and services from 2022 to 2025, they are spread patchily around Europe because of the variation in markets and regulatory frameworks for distribution system operators. “This is one of the key barriers that we could and should be addressing.” Aleksandra Klenke, policy officer for sustainable and intelligent transport at the European Commission’s transport and tourism directorate DG Move, said that the commission would publish a new standard for smart and bidirectional charging within a few weeks. However, the projected growth in EVs could be hit by difficulties building enough public chargers, particularly the expensive bidirectional versions able to also return power to the grid to help grid balancing, and connecting them to the grid. The European Commission has a target of 3.5 million chargers by 2030 — 450,000 chargers installed each year, or 8,600 a week, said a new smart charging study by the Eurelectric federation representing more than 3500 European power generation, distribution and supply utilities and the consultancy EY. Currently, said Serge Colle, EY’s global power and utilities sector leader: “The picture is mixed.” The plan faces tax and regulation barriers, a lack of suitable sites, lengthy approvals processes and the difficulties and costs of linking chargers to electricity supplies. V2G chargers are five to 10 times dearer than unidirectional chargers and most are direct current devices rather than cheaper alternating current (AC) chargers. “While AC V2G-capable chargers have recently been launched, they are only compatible with EV models equipped with onboard V2G chargers,” said Eurelectric/EY. Decisions would also be needed on the chargers to be fitted. For example, Steffen Schaefer, head of future cities and mobility at the engineering firm AFRY, said that a 100kW charger with intelligent control could be suitable for a 10 hour charge of an EV, but that installing more-expensive 200kW chargers could provide faster charging, which could be more viable for commercial vehicle owners. Also, 42% of European drivers live in cities with no access to home charging points and their cars are not always plugged in for long enough for battery capacity to be discharged to the grid, said the report. The drivers, often poorer citizens, could be deterred from buying EVs by having to use more expensive public chargers. Although many drivers worry about EVs running out of juice, few use their cars for much more than popping to the shops, with on average cars parked for 23 hours a day. But persuading people to buy EVs requires convenience for drivers, their trust in the charging system and financial incentives, said Tadhg O’Briain, a deputy head of unit in the EU’s energy directorate DG Ener. He said that the European Commission would consider legislation to ensure that those are in place. Price transparency and controls on data sharing are essential, said Nazim Khiari, policy adviser at the Council of European Energy Regulators (CEER). The European Commission also takes into account the large used-car market: “Depending on the country, 75—90% of EU consumers buy only second-hand vehicles.” Although many drivers worry about battery health and repairability, studies suggest that smart charging and bidirectional charging could extend battery life. The dream of quickly swappable EV batteries that could ease drivers’ fears about batteries going flat and allow more efficient operation of public charging stations are likely to remain a dream at least for now. Jaap Burger, senior advisor and consultant at the Regulatory Assistance Project, told Enlit Media that in seven out of 10 EVs in Europe are based on the same platform with the battery forming a structural element that is not easily removable. The Commission also warns of the limited competitiveness in zero-emission vehicle technology and production capabilities compared with rival regions, and expensive batteries and other critical components: “Batteries, which account for 30-40% of value-added of a typical electric passenger car, are a critical battleground for future employment and value creation. Europe needs a cost-competitive domestic cell production and supply chain, also with a view to preparing against supply shocks and crises and protecting economic sovereignty.” For example, it wants EU production of anode and cathode active materials and precursors, cells, and other battery parts. “This also requires investments of European players in battery material mining and refining operations in Europe or overseas. The objective for 2030 is to achieve a European added value of more than 50% along the value chain,” said the action plan. Therefore, the Commission has already announced up to €3 billion from an Innovation Fund for EV battery manufacturing, with a first €1 billion call on 3 December 2024. There is also a €200 million top-up to support innovative battery projects by enabling additional European Investment Bank venture debt in 2025-27. The Commission also promised €1.8 billion in the next two years for EU battery-makers EU from the Innovation Fund. “The Commission will look into possibilities for financing ramping up of European production lines in this context,” said the action plan. Also in the pipeline is possible direct production support for EU battery-makers combined with state aid, as part of a wider EU review of the latter. As the European Commission’s transport and tourism commissioner Apostolos Tzitzikostas told Eurelectric’s recent EVision conference on regulation, investors need regulatory stability and “buyers certainty”. And drivers need convincing. As DG Ener’s O’Briain said at EVision, consumers have traditionally served the energy system, but in future the energy system can serve consumers. Originally published on Enlit World.

powerplant

Mar 13, 2025

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