A brighter future: Why upgrading the grid is vital for Europe’s competitiveness

In the autumn of 1881, residents of the small English town of Godalming gathered along the high street to witness something extraordinary. Their town centre was lit by a brilliant white glow from arc lamps, powered by a waterwheel on the River Wey. The light flicked with the river’s flow, eventually pushing the town’s authorities to end the experiment and revert to gas lighting. But Goldaming would later be recognised as the first place in the world to have a public electricity supply. Limited in scale but not in significance, it exposed an enduring truth: electricity depends not only on the ingenuity of its generation, but on the strength and design of the systems that carry it.

Europe is today grappling with this challenge on a continental scale. Electricity demand is growing and sources of generation are diversifying, but the infrastructure needed to move power is falling behind, constrained by ageing lines, slow permitting and limited cross-border capacity. The blackout in Spain and Portugal in April 2024 was not an isolated glitch but a warning sign that networks are operating near their limits. As electrification accelerates, the grid is becoming the bottleneck to Europe’s energy transition and economic and industrial ambitions.

The Spanish stress test

Spanish industry and major consumers requested around 67 gigawatts in grid connections, but only 10% were authorised—40% were left pending, and half were rejected outright, putting an estimated €60bn in potential investment at risk.

Spain has one of Europe’s most advanced electricity systems: 66% of its installed capacity is renewable; its system operator uses sophisticated forecasting and balancing tools to manage high volumes of variable supply; and wholesale prices are among the continent’s most competitive. Spain is also unusual in maintaining a cross-continental interconnector with Morocco, allowing it to export surplus renewable power beyond the EU.

Yet the infrastructure supporting this progress has not kept pace. Estimates suggest that, by early 2025, Spain’s renewable pipeline approached 200 gigawatts—more capacity than the country’s entire power system today, which stands at around 129 gigawatts. In a system where 83.4% of network nodes are already saturated, this is far more than the grid can absorb. As a result, clean electricity is increasingly not integrated, and distribution networks designed for a fossil-fuel era are now straining under the surge in electric vehicles and rooftop solar generation.

Transmission development has also lagged behind generation. While Spain added several gigawatts of solar capacity last year, it only built a few hundred kilometres of new lines. The interconnection rate with France remains stuck at around 2% of Spain’s installed capacity—far below the EU’s 15% target for 2030—largely due to French constraints. The result is that Iberia continues to operate as an “energy island”, unable to tap neighbouring systems in periods of stress or export its surplus renewable power.

This vulnerability became evident during April’s blackout. A sharp drop in generation in southwestern Spain triggered frequency deviations—sudden shifts away from the grid’s normal 50 hertz “heartbeat” that occur when electricity supply drops faster than demand—across the peninsula. Automatic protection systems disconnected additional capacity and, with limited ability to import electricity, output collapsed.

Renewables did not cause the blackout—they exposed the limits of a system not designed for rapid and decentralised swings in supply and demand.

A competitiveness problem

These pressures are beginning to erode Europe’s competitiveness. Clean tech manufacturers, data centres and electrified heavy industry all depend on abundant, reliable and affordable electricity. Yet, companies across the EU increasingly report that grid capacity—more than labour, capital or permitting for industrial facilities—has become the decisive limitation.

Spain’s strong potential to attract energy-intensive production is being choked—an early warning of how infrastructure constraints can undermine otherwise favourable industrial conditions. In 2024, Spanish industry and major consumers requested around 67 gigawatts  in grid connections, but only 10% were authorised—40% were left pending, and half were rejected outright, putting an estimated €60bn in potential investment at risk.

Similar bottlenecks are emerging across Europe. From northern Italy to the Netherlands, industrial projects are being delayed or scaled back because local grids cannot accommodate them. Around 1,700 gigawatts of renewable projects are stuck in grid connection queues—more than three times what the EU needs for its 2030 renewable targets. In 2024 alone, seven countries curtailed a total of €7.2bn of renewable generation due to grid constraints.

These delays not only undermine climate progress but also pose a broader economic threat. Europe cannot claim leadership in clean technology if its electricity system cannot supply the power that new industries require. Furthermore, Europe is increasingly dependent on a small number of global suppliers for transformers, cables, power electronics and control systems, leading not only to long lead times, but also leaving the continent exposed to price and geopolitical pressures, ultimately restricting Europe’s ability to compete internationally.

A central problem is timing. Renewable projects can typically be permitted and built within two to three years, while major industrial facilities may take up to five years. In contrast, transmission lines, substations and interconnectors often require a decade or more. Europe’s climate goals, industrial plans and geopolitical ambitions are thus advancing at a pace that its electricity infrastructure cannot yet support. Unless grid planning, permitting and investment accelerate significantly, the network will set the limit of what Europe can achieve.

A new priority for the Commission

This is why the European Commission’s forthcoming grids package matters. Due to be announced by the end of this year, the package seeks to modernise and expand Europe’s electricity, hydrogen and other energy networks. Here are some of the key priorities it should address:

• Grid resilience: Much of Europe’s grid infrastructure is ageing; older assets fail more often and are harder to modernise. Climate extremes and cyber threats also heighten risks. Renewing assets, setting strong common security standards and improving incident-response capabilities will therefore be essential.

• Alignment with industrial strategy: Hydrogen valleys, data centres and new industrial clusters are developing faster than the networks needed to support them. Grid operators lack visibility on future demand, while investors lack clarity on where and when capacity will be available. Long-term grid planning therefore needs to move in lockstep with national industrial priorities.

• Supply-chain exposure: Europe’s grid expansion depends on transformers, cables, power electronics and digital control systems at a time when global demand for these components is accelerating. But Europe has strong manufacturers across several transmission segments, an asset that is often overlooked. By expanding production capacity, backing innovation and promoting circular-economy approaches, Europe can improve supply chain security and position its companies to shape the next generation of grid technologies.

• Grid development: Permitting for transmission lines, distribution upgrades and storage projects remain slow and inconsistent across the Union. The reforms that accelerated renewable permitting need to extend to the wider system. Stronger coordination between EU-level objectives and national grid plans, alongside clearer visibility on future capacity, will give industry more confidence to invest where power can be reliably delivered.
  
• Interconnection: Greater cross-border capacity improves flexibility, reduces regional price disparities and enhances solidarity during shocks. Long-standing bottlenecks, from the Iberian Peninsula to south-east Europe, along with central European corridors, continue to hold Europe back. Overcoming them will require sustained political backing and faster delivery.
  
• Flexibility and digitisation: Storage, demand management, smart substations, digital twins, and advanced forecasting have become essential tools for operating a more decentralised power system with much higher shares of renewables. These capabilities need to be embedded from the outset rather than treated as optional enhancements.

• Financing: Electrifying industry and expanding renewable generation will require far more investment in transmission and distribution grids than what is currently planned. Member states should therefore support a major increase in the Connecting Europe Facility and prioritise grid investment in their future national and regional planning, drawing on complementary financing instruments where appropriate, such as those related to security and resilience.
  
• Public support: Resistance to new lines and substations is rising, often fuelled by mistrust or misinformation, making early engagement and clear communication essential. More than just rebutting disinformation, communication should emphasise public benefits. For example, the recent Spanish blackout showed that stronger interconnection with France could have sped up recovery. It is therefore essential to convey to the public that acting together in Europe boosts resilience.

Europe’s choice

The decisions Europe takes now will determine whether its energy transition accelerates or stalls at the grid. Godalming’s lamps faded because the underlying system was unprepared. Spain’s blackout highlighted that same lesson on a continental scale. Europe can now generate more clean energy than ever before, but without the networks to carry it, the green transition will continue to flicker. Ultimately, the grids will decide how bright Europe’s future will be.