Between €375bn and €425bn ($456bn-516bn) will need to be invested in Europe’s distribution grids between now and 2030 to ensure they can handle increasing volumes of variable renewable energy and green hydrogen production, as well as the expected electrification of heating and transport, according to a new study.

These figures represent a 50-70% increase on annual distribution-grid investment in the 2010s. However, the societal benefits of smarter, more powerful distribution grids will outweigh the economic impacts, according to electricity industry body Eurelectric, which produced the report in conjunction with E.DSO (European Distribution System Operators) and strategy consultant Monitor Deloitte.

“Distribution grids are the backbone of the digital and energy transition, as they ensure a continuous and reliable electricity flow, integrate the majority of renewable energy sources and enable the creation of new services for consumers,” said Eurelectric. “But to be fit-for-purpose in an increasingly decarbonised, decentralised and digitalised power system, there is an urgent need to ramp up investments in Europe’s distribution grids.”

Improving distribution grids could save the EU more than €175bn in fossil-fuel imports annually, and ultimately reduce the average electricity costs by €28-37bn in the long term, Eurelectric explained, adding that the distribution grid investments would sustain 440,000 to 620,000 “quality jobs”.

“What we show in the study is that actually the unit cost of electricity [ie, per kWh for customers] is only going to rise by 1.5%, even with this significant investment,” Eurelectric secretary-general Kristian Ruby tells Recharge.

This is because distribution — the delivery of low- and medium-voltage power to homes and businesses — only accounts for a small proportion of electricity charges, and because smarter grids will allow an increased amount of variable renewable energy on the grid, which will be cheaper than fossil-fuel-fired power, he explained.

In addition, smarter distribution grids will also allow consumers to save money through smart electric-vehicle (EV) charging and demand-side response. In other words, they will be able to increase their power consumption when spot prices are low (ie, when there is a lot of wind and solar power on the grid and demand is low), and reduce consumption when spot prices are high (ie, when there is little or no wind or solar power on the grid).

This would not only reduce consumer bills, but also help network operators balance the grid and reduce the need to dig up roads to install higher-capacity power cables.

The report, entitled Connecting the dots: Distribution grid investment to power the energy transition, shows that if 40 EVs in a single housing block were all simultaneously charged during the evening peak, the 153kW power-distribution line would need to be upgraded to 212kW to meet the extra demand. But if the same number of EVs were charged overnight with smart charging — ie, staggering their charging throughout the night — only 120kW would be required, removing the need to replace the connection.

“Building new lines is expensive; digital solutions are replicable and inexpensive,” Ruby said.

This is why data management will be one of the core distribution-grid investments highlighted in the report, accounting for €25bn-30bn of the €375bn-425bn total.

The other investment drivers are: electrification of buildings and industry (€70bn-80bn); electrification of transport (€25bn-35bn); emission-free generation (ie, to connect wind and solar projects to the distribution grid) (€85bn-95bn); modernisation (ie, replacement of grid infrastructure reaches the end of its useful life) (€90bn-105bn); smart meters (€30bn-35bn); resilience against expected increase in natural disasters and extreme weather (€30bn-35bn); and about €7bn for large-scale storage connected to the distribution grid.

We call on policymakers to improve investment frameworks and tariff design, facilitate access to EU funds and accelerate authorisation and permit granting processes.”

All the calculations in the report were made with the following assumptions about distribution-grid requirements in 2030: that 510GW of wind and solar power will be installed across the EU27 and the UK in 2030, with 40GW of that being self-consumption; 50-70 million electric vehicles on the streets; 40-50 million electric heat pumps installed, and demand for green-hydrogen production of about 3,530TWh.