Grid investment can mark a turning point for Europe’s power system stability and energy security

Five months after a blackout plunged Spain and Portugal into darkness on 28 April, the event remains unfinished business. The European Network of Transmission System Operators for Electricity (ENTSO-E) plans to publish its conclusions on the causes of the blackout this week. Early evidence points to a lack of grid responsiveness.

Grid frequency restoration took more than six hours in some areas, according to an ENTSO-E preliminary investigation published in August. This is much longer than the maximum 30-minute expected response from the frequency reserve process. 

IEEFA has previously identified likely drivers of the blackout, pointing to the Spanish transmission system operator’s (TSO) inadequate use and dimensioning of frequency reserve services. Regardless of the exact cause, it is certain that a lack of grid responsiveness was a major reason for the prolonged power outage.

The event highlights that European TSOs must strengthen electricity networks and integrate more renewables and energy storage projects. With the right investments, grids could help underpin energy resilience, security and affordability. 

Not the first warning

The blackout showed that a lack of grid investment can threaten the equilibrium between electricity supply and demand. It also exposed the risk of insufficient grid resilience in a network with high levels of renewables growth. 

A May 2025 joint report from Beyond Fossil Fuels, Ember, E3G and IEEFA flagged this weakness. According to the research, high levels of renewable energy curtailment in 2024 show the need for more investment in “clean flexibility” technologies – such as demand-side flexibility and energy storage – and grid balancing. Meanwhile, queues of solar, wind and storage projects waiting for grid connections have expanded across Europe. The report found that the amount of renewables stuck in queues is more than three times the capacity needed for the EU to reach its 2030 energy and climate targets. 

Outdated grid connection processes worsen these queues. This underscores the need for grid strengthening and smartening, together with more support for ancillary services (frequency control reserves), the lack of which has long been identified as holding back the energy transition. With the right investments, the benefits will be meaningful: queues cleared, clean energy delivered rather than wasted, and a more resilient power system.  

Financial case for grid investment 

There are, at last, signs of movement. In June, the European Commission issued long-awaited guidance on anticipatory investments for electric grids. This allows regulators to approve projects in advance of visible demand. The Commission estimates that the EU transmission network alone will require a €477 billion investment by 2040, underlining the need for TSOs to tap multiple funding channels.

The case for external investments is sound, offering visible returns usually backed by established regulatory frameworks. The majority of Europe’s TSOs have investment-grade ratings, indicating ready funding access and relatively low cost of capital, and a financial buffer to support the expansion of their investment programmes. In July, Italy’s Terna set an important precedent by becoming the first electric grid operator to issue bonds under the European Green Bond Standard, showing a best practice of leveraging sustainable finance to fund grid developments. The €750 million transaction was almost five times oversubscribed, allowing spreads to tighten.

What comes next

The Spanish government has initiated an investigation into the blackout to provide an unbiased account of the event. While ENTSO-E will release its conclusions on 3 October, one should keep in mind that these results could represent the TSO point of view. 

As the joint report warned in May, it is clear that insufficient capital expenditure planning by TSOs not only limits renewables growth but also weakens grid resilience when electricity supply and demand are not balanced.

Europe now has the tools to fix this, backed by the world’s most comprehensive sustainable finance architecture. The European Commission is preparing the European Grids Package. This must support climate-aligned legal mandates, stronger governance and oversight, and innovative solutions for renewables and storage integration, as the May report suggested. 

If Europe can act on these fronts, the grids will shift from being the weak link to a foundation for the continent’s climate neutrality. This can also unlock long-term social-economic benefits through electrification, future-proofed infrastructure and reduced exposure to commodity price volatility.