Energy grids: from missing link to critical bottleneck in the energy transition

Renewable energy generation differs fundamentally from conventional power production. Wind farms, especially offshore, solar parks, battery storage facilities and future green hydrogen projects are often located far from population centres and industrial demand hubs. Energy therefore needs to be transported over greater distances and managed more dynamically than in the past.

With the ever increasing renewable generation capacity, transmission and distribution networks must expand and evolve to accommodate intermittent power generation, integrate decentralised energy sources and ensure security of supply. More than 2,500 GW of renewable energy, large-load and storage projects are currently awaiting grid connection worldwide. At the same time, investment in grid infrastructure has failed to keep pace with spending on power generation, leading to growing congestion and increasing levels of renewable curtailment in many electricity systems.³ The rising frequency of negative price periods further signals inefficiencies in electricity markets caused by insufficient network and storage capacity and flexibility.

Without additional investment in electricity grids, charging infrastructure and storage technologies, the energy system will struggle to absorb growing volumes of renewable power.

The challenge is already visible today. Thousands of gigawatts of renewable energy and battery projects are waiting for grid connections around the world, preventing clean energy from being brought online despite being ready for deployment. To address this gap, global grid investment needs to increase substantially over the coming years, with a particular focus on modernising distribution networks, building new transmission lines and strengthening cross-border interconnections.

The grid of the future will look very different from the one built in the twentieth century. Historically, electricity flowed in one direction – from large power plants to consumers. The future energy system will be decentralised, digital and increasingly intelligent.

Millions of distributed assets, including rooftop solar installations, batteries, electric vehicles, heat pumps and small-scale renewable generators, will need to interact seamlessly with the grid – and smart grids will play a central role in this transformation. By leveraging data analytics, sensors and artificial intelligence, smart grids can forecast electricity demand, optimise power flows in real time and improve the integration of renewable energy sources. The deployment of smart meters will be particularly important, as they provide the data foundation required for a more flexible and intelligent electricity system. These capabilities can help maintain grid stability while reducing costs and improving reliability.

Technological innovation is creating entirely new opportunities. Distributed battery storage, local microgrids, long-duration energy storage solutions and demand-side flexibility can all complement traditional network infrastructure and enhance resilience. The result is a more flexible and robust energy system capable of supporting a much larger share of renewable power.

The modernisation of electricity networks is not only an environmental imperative but also a strategic economic priority. Recent geopolitical developments have highlighted the importance of secure, independent and resilient energy systems. Grid infrastructure can also enhance economic competitiveness. Cross-border interconnectors enable countries to balance supply and demand more efficiently, improve market integration and lower overall system costs. Projects such as NeuConnect, the first submarine electricity interconnector between Germany and the United Kingdom, demonstrate how modern energy infrastructure can increase system flexibility, facilitate renewable integration and strengthen energy cooperation across national borders.

According to the European Commission, achieving the EU’s clean energy transition objectives will require around €660 billion of investment per year between 2026 and 2030, increasing to approximately €695 billion annually between 2031 and 2040. And also, transforming energy grids will require enormous amounts of long-term capital. Public funding alone is unlikely to be sufficient, especially given increasing fiscal pressures and competing spending priorities across many countries. Private capital therefore has a crucial role to play

Infrastructure investors are particularly well positioned to support grid modernisation because electricity networks typically exhibit long asset lives, essential-service characteristics and predictable cash-flow profiles. In addition to financing, experienced infrastructure investors can contribute operational expertise, project management capabilities and the ability to mobilise additional institutional capital. Europe alone holds a substantial pool of institutional capital, only a small proportion of which is currently allocated to infrastructure. Increasing these allocations could accelerate the buildout of critical energy infrastructure and help close the investment gap.

Despite the scale of the opportunity, the path to a modernised grid is not without obstacles. Permitting and planning processes remain a major constraint: depending on the jurisdiction, developing and completing a new transmission line can take between five and fifteen years, far exceeding the timelines needed to keep pace with renewable capacity additions. Regulatory frameworks in many markets have not yet been fully adapted to reflect the urgency of grid expansion, and lengthy approval procedures, land-use conflicts and public acceptance issues can further delay critical projects.

Supply chains present an additional bottleneck. Global demand for transformers, high-voltage cables and other key grid components has risen sharply, leading to extended lead times and, in some cases, multi-year waiting lists for essential equipment. At the same time, the sector faces a shortage of skilled engineers, electricians and project managers capable of designing, building and maintaining increasingly complex and digitalised networks. Without a coordinated effort to expand manufacturing capacity, diversify supply chains and invest in workforce training, these constraints risk slowing the pace of grid build-out even where capital and political will are available. Addressing these execution risks will be just as important as mobilising financing if the energy transition is to stay on track.

Despite the scale of the opportunity, the path to a modernised grid is not without obstacles. Permitting and planning processes remain a major constraint: depending on the jurisdiction, developing and completing a new transmission line can take between five and fifteen years, far exceeding the timelines needed to keep pace with renewable capacity additions. Regulatory frameworks in many markets have not yet been fully adapted to reflect the urgency of grid expansion, and lengthy approval procedures, land-use conflicts and public acceptance issues can further delay critical projects.

Supply chains present an additional bottleneck. Global demand for transformers, high-voltage cables and other key grid components has risen sharply, leading to extended lead times and, in some cases, multi-year waiting lists for essential equipment. At the same time, the sector faces a shortage of skilled engineers, electricians and project managers capable of designing, building and maintaining increasingly complex and digitalised networks. Without a coordinated effort to expand manufacturing capacity, diversify supply chains and invest in workforce training, these constraints risk slowing the pace of grid build-out even where capital and political will are available. Addressing these execution risks will be just as important as mobilising financing if the energy transition is to stay on track.

The energy transition is often associated with wind turbines, solar panels and green hydrogen. Yet none of these technologies can achieve their full potential without modern electricity networks. Energy grids are the backbone of the future energy system. They connect renewable generation with consumers, enable electrification, support energy security and create the foundation for economic competitiveness in a low-carbon economy. As electricity demand continues to rise and power systems become increasingly decentralised, digitalised and interconnected, investment in grid infrastructure will become one of the defining priorities of the energy transition. Simply put: there is no energy transition without energy grids.