The European Commission has published a report detailing the investment requirements for energy infrastructure in the European Union (EU) to ensure a transition towards a decarbonized economy. According to the document, planned investments in the EU’s energy sector will exceed €1.4 trillion between 2024 and 2040, with a strong focus on modernizing and expanding the electricity grid.

The study indicates that investment distribution will not be uniform. Germany, France, and the Netherlands lead the spending, accounting for 53% of the total investment up to 2040. In contrast, Central and Eastern European regions show lower financial planning, which could delay the energy transition in these areas.

Electricity Grids: The Absolute Priority

The report highlights that 79% of investments will be directed towards electricity infrastructure, including both transmission and distribution. Specifically, electricity distribution will absorb nearly half of the total, with an estimated €730 billion allocated. This need arises from the growing deployment of renewable energy, the electrification of industrial sectors, and the increasing demand for electric vehicles and heat pumps.

Meanwhile, transmission investments will reach €472 billion, of which €130 billion will be allocated to cross-border projects aimed at enhancing the interconnection of electricity markets across the EU.

“Strengthening the grid is a fundamental pillar of the energy transition. Without massive investments in transmission and distribution, integrating renewables will be a much greater challenge,” the report states.

Additionally, the report underscores the importance of offshore transmission infrastructure, which will facilitate the connection of offshore wind farms to the continental electricity grid. Investments in this area are estimated to be around €51 billion.

Hydrogen: A Costly but Key Investment

Another strategic area is hydrogen infrastructure, which will require around €170 billion by 2040. Of this amount, €105.2 billion will be allocated to the construction of 24,162 km of new pipelines and the repurposing of 14,039 km of existing pipelines.

Hydrogen is emerging as a key energy carrier for the decarbonization of industry and heavy transport, yet it still faces regulatory and technological uncertainties. In addition to pipeline investments, further €27 billion will be directed toward underground storage, €20 billion for import terminals, and €16.3 billion for electrolyzers.

“Investments in hydrogen require a strong support framework, as economic viability remains uncertain in some segments,” the report states.

How Will the Transition Be Funded? The Role of the EU and the Private Sector

Given the significant investment volume required, the report emphasizes the need for both public and private financing. European funds, through the Connecting Europe Facility (CEF), the Innovation Fund, and the European Investment Bank (EIB), will play a crucial role in financing strategic projects.

A blended financing approach is proposed, where EU funds act as risk mitigators to attract private capital. Additionally, the report suggests the use of green bonds, guarantee schemes, and adjustments to state aid regulations to facilitate investment.

“Public financing should focus on projects with cross-border benefits or high-risk emerging technologies,” the study points out.