Grid operators in Europe are facing a shortfall of 250 billion euros, or $293 billion, in investments necessary to upgrade grids in line with energy transition plans, Boston Consulting Group has said in a new report.
BCG said that over the next three years, transmission system operators, or TSOs, in Europe, should invest 345 billion euro ($405 bln) over the next three years. That amount would be three times larger than investments in the five previous years. However, grid operators would only be able to generate a portion of that investment, BCG said.
“Without new approaches to financing and capital efficiency, TSOs may fall short of delivering the infrastructure needed to meet Europe’s climate and reliability goals,” the company said, identifying three problematic areas. These are, first, limitations to TSOs capacity to raise money via debt or equity; second, a tension between efforts to keep electricity costs low for consumers while ensuring a certain level of returns to investors in grid operators; and third, different expectations of these grid operators from governments, on the one hand, and investors, on the other.
Governments see grid operators as growth companies, focusing on investment and growth, while investors see them as a low-risk investment with a certain dividend. It is because of this dividend aspect that BCG sees the investment gap: the estimated amount that Europe’s 15 largest TSOs are seen paying in the period between 2025 and 2030 is between 25 and 30 billion euros, or $29-$35 billion.
“Without rapid innovation in how we finance grid infrastructure, Europe risks having world-class renewable generation that can’t reach consumers because the grid hasn’t kept pace,” one of the authors of the report, Tom Brijs, said.
Options are not unlimited, however, with BCG suggesting stake sales and “government-backed financing tools”, which essentially means subsidies.
By Irina Slav for Oilprice.com
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