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European grid plans fall short by 250 billion euros

Boston Consulting Group's report on Thursday revealed that the European electricity transmission system operators (TSOs) have a shortfall of 250 billion euros ($293 billion).

Why it is important

Spain and Portugal experienced their worst power outage at the end of April. In large areas of the Czech Republic, there was an outage last week. These incidents have raised concerns over the resilience of Europe’s electricity system.

The increased electrification of Europe, the growth in power consumption from AI and data centers, the integration of renewables and aging infrastructure are all contributing factors.

The report didn't provide details on the subsidies that some grid operators may receive. Some TSOs may receive subsidies from EU funding programs or initiatives of member states.

By the Numbers

The report stated that the 15 largest TSOs in Europe are expected to grow their operating cash flow from 2020-2024 to 120 billion euro by 2025-2029. This is up from 57billion euros between 2020-2024.

The plan is to triple the capital investment in five years to 345 billion Euros.

The report stated that if dividends of between 25 billion and $30 billion euros were also to be paid, there would still be a funding shortfall of approximately 250 billion euros.

The report said that this would have to be addressed through equity, debt, divestitures, or lower dividends.

CONTEXT

The report stated that Europe must build more grid infrastructure in the next five-years than it did over the last two decades.

The balance sheets of TSOs have been put under pressure. TSOs have high levels of debt, and many are struggling to raise capital in the face fierce competition.

KEY QUOTE

Tom Brijs is a BCG partner, and the co-author of this report. "Without rapid innovations in how we finance the grid infrastructure, Europe runs the risk of having world-class, renewable energy that cannot reach consumers, because the grid can't keep up," he said. Reporting by Nina Chestney, Editing by David Goodman.

(source: Reuters)