We don’t have to accept grid congestion

Authors: Pieter-Jan Mermans s Dirk Dewals, Junction Growth Investors

Pieter-Jan Mermans and Dirk Dewals are the co-founders and managing partners of Junction, an investment fund that invests in scalable climate technologies. Previously, Mermans was also the founder of REstore, which was sold to Centrica. Dewals has over 25 years of experience in M&A and private equity, including board membership at Gimv.

“Grid congestion” is plaguingthe Netherlands,Germany,andnowrecently,Belgiumas well.Today,thousandsof companiesandconsumerscannot connecttotheelectricity gridandareresortingtodieselgeneratorsasfallback.

Jan Rosenow, Europe’s leading expert on the energy transition, described this recently as a sign of success: it shows that numerous bottom-up electrification initiatives are underway, ranging from solar installations and wind farms to the electrification of industrial processes. The bottleneck is shifting from renewable energy production to its transport and distribution.

So yes, from a distance it looks like good news for electrification, but grid congestion is undeniably bad news for Europe’s economic growth and for global warming. We don’t have to resign ourselves to it or wait until new high-voltage lines are finally built.

The European Commission recently presented an ambitious plan to tackle grid congestion. By 2040, it aims to massively scale up grid capacity through a mix of major infrastructure projects, simplified TEN-E rules, cross-border cooperation and faster permitting procedures.

The Commission now also requires grid operators, when deploying cross-border networks, to examine the potential of “non-wire solutions”. These are often digital solutions such as digital twins, granular data, sensors and AI that allow us to monitor, plan and adjust transmission and distribution networks in real time.

Think of it like a typical traffic jam problem: installing extra cables is like widening the motorway, whereas grid-enhancing technology is like adding flexible rush-hour lanes combined with Waze. It provides a real-time, detailed overview of the areas of the network that are not yet saturated.

Grid technologies can create an estimated 20 to 40% of additional capacity in the very short term. It is good news that Europe now requires this on cross-border networks, but the biggest gains naturally lie in the national grids.

Thecostofgrid-enhancingtechnologyisbarely 10% ofwhatitcoststobuilda newline. AcrossEurope,thepotentialsavingsareestimatedatanastonishingEUR700billionin expansioncosts.

Sounds too good to be true? Belgium-based scale-up Ampacimon managed to avoid USD 23 million in congestion costs on a single high-voltage line in the United States.

Thedifferenceinleadtimeisequallyimpressive.Connectingoffshorewindthroughthe traditionalroutecaneasilytake15years.Adroneinstallsasensorin10minutesthat increasesthecapacityofanexistingline.

Technologyisnotamagicfix.Wedoneednew infrastructure. But such infrastructureis technicallycomplexandextremelytime-consuming.Wecannotaffordtowaitforyears. Bythen,thedamagewouldbebeyondcontrol.

Betting on two horses: infrastructure and technology

The good news is that we do not need to choose between infrastructure and digitalisation.

We can quite easily bet on both: build new lines and lay new cables, and at the same time rapidly unlock extra capacity on the existing infrastructure. The technology is proven and immediately deployable; financing is available through existing EU instruments and the European Investment Bank. Grid-enhancing technologies and general digitalisation result in a more robust grid, faster connections, faster electrification and lower energy bills. However, accelerated implementation of these technologies often requires a regulatory shift.

While billions and trillions are the talk of the town, we can achieve major economic, ecological and societal benefits in the short term with relatively “small” investments. What’s the saying again? Look after the pennies…