Investing €90 billion annually in the EU power grid could cut electricity prices by 11% by 2035 and 30% by 2040, according to Allianz Research.
The European response to Donald Trump’s “Drill, Baby, Drill” should be a resounding “Plug, Baby, Plug.” According to a report by Allianz Research, the European Union needs to invest €90 billion per year -totaling €2.3 trillion by 2050 – to modernize its electricity grid and unlock the continent’s energy transition.
Why the EU Power Grid Is Holding Back the Energy Transition
Europe’s outdated electricity infrastructure and market design disparities have become major roadblocks to achieving climate neutrality. One striking example: delays in grid development have created a backlog of more than 800 GW of wind and solar capacity waiting for connection—nearly twice the current supply.
A new report from Allianz Research, “Plug, Baby, Plug: Unlocking Europe’s Electricity Market,” outlines the scale of investment needed, the expected impacts, and the risks of inaction.
How Much Investment Is Needed for the EU’s Power Grid?
The EU power market transition will require an average annual investment of €90.8 billion, totaling approximately €2.3 trillion by 2050. Compared to the current €60 billion annual investment, funding needs to increase by at least 30% (€18 billion per year) by 2030. Assuming a linear investment trend, annual spending would average €94 billion between 2030 and 2050.
However, to meet the EU’s goal of reducing emissions by 90% by 2040, the pace of renewable energy expansion must accelerate. Allianz Research warns that annual investments may need to exceed €100 billion through 2040.
Where Should the EU Focus Its Power Grid Investments?
The distribution network will require the largest share, absorbing at least 56% of the total funding, with €220 billion needed by 2030. Germany, France, and Italy have the highest investment needs, collectively accounting for 50% of distribution grid spending.
Transmission infrastructure, which must expand by 28% by 2030, will require €694 billion by 2050. Beyond national grids, interconnection and storage capacity must double by 2030, requiring an additional €10 billion annually.
What Are the Expected Benefits of These Investments?
According to Allianz Research, the proposed investments could cut final electricity prices by 11% by 2035 and 30% by 2040.
Expanding interconnection and storage capacity, while requiring €10 billion per year, would generate long-term savings of €23 billion by 2050.
Grid optimization would also enhance energy efficiency. The widespread use of smart meters could reduce peak loads and storage needs, lowering household energy consumption by 2–10%. In Germany, for example, the 10 TWh of curtailed renewable energy in 2023 could have been used to produce green hydrogen, covering 12% of national demand without additional generation.
Additionally, electric vehicles equipped with bidirectional charging could improve grid stability, ease congestion, and cut EU emissions by 7%.
The Cost of Inaction: Higher Prices and Economic Losses
Without grid upgrades, congestion costs will surge from €2.5 billion in 2019 to €12.3 billion by 2030 and €56.7 billion by 2040. These costs would push electricity prices up by 22% by 2030 and up to 103% by 2040 under a business-as-usual scenario.
The economic consequences would extend beyond electricity prices, threatening GDP growth and industrial competitiveness. Germany alone could face GDP losses of €1.6 trillion by 2050.
