Portugal's electrical networks need to invest 825 million euros annually, between 2025 and 2050, to respond to the growing demand in an increasingly electrified society.
These forecasts from consultancy EY are in a study conducted for the European Association of Companies in the Electricity Sector (Eureletric), which included models from Imperial College London, based on forecasts from the European Union's RepowerEU plan. The study was limited to analyzing the need for investment in the distribution network, without taking into account transportation networks.
The largest tranche in Portugal (nearly $300 million) aims to strengthen the network due to demand growth, followed by a $200 million tranche to replace/renew the existing network. The third, largest tranche aims to strengthen the network with the arrival of new stations (100 million), followed by investment in system automation and digitization, smart meters and flexibility.
The arrival of more electric cars and the need to charge them, as well as the growth in wind and solar capacity, are factors contributing to the need to strengthen grids.
But there is more: renewal of conductors, substations and distribution panels due to corrosion. As well as creating new electrical corridors to “increase flexibility,” reminding the association that a program is currently being implemented to install smart meters among consumers, which is scheduled to be completed before the end of the year.
At the European Union level, the total investment need reaches 67 billion euros annually between 2025 and 2050. Kite from dough.
Electricity weighs only 23% of the total energy consumed in the EU today, and the increase in societal electrification is expected to increase its weight: 61% of electricity in final energy consumption in 2050. At the same time, renewable energy capacity is expected to increase Sixfold between 2020 and 2050, with 70% of renewable energy sources connected to the distribution grid. The study highlights: “To ease tensions and enable the energy transition, annual investments in new and modern infrastructure, as well as digitalization, must reach $67 billion in the period from 2025 to 2050, i.e. about 0.4% of the Union’s GDP.” “European”. One of the keys to this strategy is “proactive investments”: investing earlier than expected, to avoid escalating costs and network congestion.
Looking at Portugal: Electricity consumption reached 50 TWh in 2023, and the study predicts it will approach 80 TWh in 2050. Renewable energy production (solar + onshore wind) is expected to exceed 100 TWh in 2050 , compared to a value of 14 TWh in 2020. By sector, the significant rise in electricity consumption in Portugal will occur in the field of transportation: it will rise to nearly 20 TWh in 2050. In the industrial sector, it is expected to rise from approx. 30 TWh to about 40 TWh. In buildings, it should increase to a value close to 20 TWh.
Electricity consumption in the European Union cannot be stopped: between 1990 and 2023, it rose by 500 TWh to reach 2,500 TWh. By 2050, it is expected to grow four times: another 2,000 terawatt-hours to 4,500 terawatt-hours.
The study highlights that focusing on electrification allows for a reduction in fossil fuel imports, leading to a reduction of $300 billion annually. From the expected 451 billion euros for this year, to 142 billion euros annually in the 2040s.
Logically, the major European countries receive the lion's share of investment: Germany needs to invest approximately 18 billion euros annually; Italy, more than 10 billion; France, more than five billion; Netherlands, nearly five billion; Spain, more than four billion. The smallest countries have shares similar to Portugal: Ireland (1.1 billion), Greece (1 billion).
Per capita investment is highest in Norway (nearly two billion dollars annually in total) and Denmark (two billion dollars annually in total).
In a conversation with Jornal Economico, the Secretary General of Eurelectric explains what is at stake. Cristian Rubi was in Lisbon on Tuesday, where he presented the study at the conference of the Association of Portuguese Companies in the Electricity Sector (Electpor).
How to finance 67 billion euros annually in networks?
This is a question worth a billion euros. The way networks are financed is through bills paid by consumers. It is a healthy principle, because whoever uses the network is the one who pays for it. Now, one of the challenges is that we are moving from a world with a stable electrical system to a radical growth scenario. We need to balance two things: on the one hand, we need to build today for the future so that we don't end up filling up the streets every three years; On the other hand, we have to ensure that people will not pay a high bill, because then people will question the need to electrify everything. There has to be an incentive for electricity, we can't make it too expensive, but at the same time investment has to happen. One of the things we can do is make it easier for businesses to access public funds. Example: There is an important investment to be made in Portugal, if the EU pays part of it, the bill will not rise much. This may help. But for this to happen, regulation must encourage distribution network operators to accept public funds. In the long run, the financing problem will not be as big because we will be using more electricity in the community and there will be more kilowatt-hours to spread out this investment cost. It's only in the short term [maior impacto na fatura] When the demand for electricity has not yet increased. That's why we need a special framework for these proactive, long-term investments.
He stated in his presentation that the Multiannual Financial Framework (MFF), the EU's long-term budget, could finance networks…
What they traditionally do is focus on cross-border projects because they claim that local networks should be financed locally. But the world is changing, and the energy transition crosses borders, as do energy security issues. There is now a more convincing framework for the EU to also help finance local networks.
One of the problems in Portugal is the licensing of projects…
This requires urgent attention from policymakers in all Member States. One of the things that can also help grids, like renewables, are accelerator zones. Places where there's already an industry, for example, and where it's easier to license renewables, which makes it easier for the operator to build the line, which makes it easier to license renewables and the line.
Another crucial point is that in recent years the principle of overriding public interest has been adopted with regard to renewables, grids and storage. There is some legislation to protect citizens and the environment, but there is an overriding public interest in building renewables because we need climate protection, because we need energy security.
Therefore, when there is a case in court, the judge and lawyers can say that there is an overriding public interest. This is very important, and it changes things. For example, in Germany there are many operations in the field of renewable energy sources, and now they are making things faster.
It is necessary to change the way public administration works. In some countries, you have to go to the local authority with all the papers, and we are talking about 20 meters of documents. It must be delivered in person and personally signed. That's impossible in the digital age, right?
There are some examples of how we can turn this into a digital process and make it easier for businesses. It also makes it easier for the bureaucrat responsible for the process.
Another thing that could be done is to reverse the deadlines principle: if management failed to respond by a certain date, this would give rise to implied consent, reversing the burden of proof.
It is very important that Member States start implementing these rules because they can have a positive impact.
As you know, the European Union has very ambitious targets regarding renewable energy sources, and the Member States also have very ambitious national plans (PNEC). Do you think that the goals set by 2030 will be achieved? Are they realistic?
It will be achieved eventually. There may be a slight delay. We did our best to achieve the goals. But ultimately, governments, authorities, companies and the public have to ensure that the goals can be achieved: everyone must work together to make it happen.
Will natural gas remain important in the coming decades?
The good news is that things are moving quickly. This year, we had 73% carbon-free energy in Europe, with half of our total electricity coming from renewables and 23% from nuclear. When it comes to decarbonizing electricity, Europe is doing well. But we will still need gas to fill the gaps when renewables are not producing and when there are peak periods. But the role of gas will be increasingly small.
Renewable energy is sexy, grids are not sexy. How can Brussels be persuaded to put so much money into networks? Is it an easy task?
It certainly goes without saying for politicians to talk about beautiful wind turbines, but in recent years there has been a shift in focus to grids. People realize that for renewables to happen, you have to have grids. Through our study, we tried to draw attention to this.
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