Summary of the main points of "Sprint towards sustainable grids" discussion

Round table “Sprint towards sustainable grids“

Summary of the discussion

On 15 May 2025, the Energy Management Institute (EMI) organized a roundtable discussion on one of the most important issues for a successful energy transition in Bulgaria and Europe – the need to ensure accelerated investments in the electricity grid infrastructure as a condition for widespread and efficient electrification of industry, transport, heating, for the integration of renewable energy sources and simultaneously – as a response to the increasing extreme geopolitical, climate and cyber threats. The event was part of EMI’s 15th anniversary celebrations and brought together experts, institutions and businesses in a collaborative search for solutions to one of the biggest challenges facing the energy sector today.

Key challenges include:

The need for new regulatory instruments – promote the changing cost structure of network operators, which also reflects the changing role these companies play;
Insufficient funding – a mix of low regulated prices and lack of EU and/or government grants;
Administrative burden – easing procedures for the construction of new and maintenance of existing infrastructure, which responds to the increased interest and shortened timeframes for the connection of new consumers and producers;
Human capital – skills shortages and wage growth are a universal challenge that is felt even more in price-regulated sectors;
Supply chains – ensuring smooth and timely delivery of materials, components, machinery and equipment.

These problems are not unique to Bulgaria, but the political instability in the country in recent years inevitably deepens them. This means it is time not just to accelerate investment to meet the demand for new services, but also to make up for lost time over the years. Moreover, anticipatory investment is needed to anticipate the evolution of electricity consumption and hence demand for network services.

HIGHLIGHTS OF THE DISCUSSION

The development and modernisation of grids has a crucial role to play in the transition to a carbon neutral economy. If Europe’s electricity consumption has grown by 500 TWh since 1990, the next 30 years will see a four-fold increase, according to Eurelectric. The leading drivers will be electric vehicles with their charging infrastructure and heat pumps on the one hand, and photovoltaic installations on the other. By 2050, renewable energy projects requiring grid connection could increase 8-fold.
A revolutionary change in networks – new, bi-directional and unpredictable energy flows. Grids are entering a qualitatively new stage: bidirectional flows make the system difficult to predict and require “grids 2.0”. Grids are being upgraded, but a dramatically accelerated pace of investment is needed to match the breakneck speed of change. Forward investment in network assets is an investment in the future competitiveness of the country.
Growing threats and ageing infrastructure: the job of grid operators to keep the electricity system up and running 24/7 in the face of growing threats of various kinds is becoming increasingly complex and responsible. Electrification is underway, but there are other challenges that cannot be ignored. Extreme weather events and cyber-attacks are increasingly leading to power line outages, as was the situation in Bulgaria over the Christmas holidays. At the same time, customer expectations and the way they interact with networks are changing. Today, 30% of Europe’s grids are over 40 years old, and by 2050 this proportion could reach 90%, calling into question the reliability of the energy system.
Investment dynamics in the EU: On average, around €33 billion per year is invested in the expansion and renewal of distribution network assets over the period 2020-2023, according to a study by Eurelectric. The results achieved include more customer and generator connections, new and upgraded substations, new transmission lines and advanced digitisation. However, the pace is insufficient compared to the avalanche of renewables penetration, the empowerment of consumers with a different set of options to participate in electricity markets and the electrification of transport.
Investment Gap by 2050: To meet the steep rise in electricity consumption to an expected 4,500 TWh, Europe needs to double grid investment to €67 billion per year. With upfront investment, flexibility measures and renewal of network assets, this could be brought down to €55 billion (Eurelectric).
Cost structure of network projects – about 52% is fixed costs – electrical installation and construction – plus permitting, engineering and project management costs, which add another 20% or so. Variables are mainly material and equipment costs. A small increase in variable costs, e.g. 10-20%, can double the installed capacity (e.g. of a power line or a transformer), while leaving fixed costs unchanged. It is therefore cost-effective to strategically stake more capacity when replacing or reinforcing networks, anticipating future freight growth.
Risks of falling behind – if the grid is not prepared in time, this will not only delay the energy transition, but also undermine energy security and the benefits of decarbonisation. Given this, timely financing of grid projects is of utmost importance. Tariff design should both ensure adequate returns to network operators and encourage consumers to help balance the system by providing additional financial support against price shocks.
The Bulgarian paradox – lowest tariffs with disproportionately high investment needs. Network tariffs in Bulgaria are significantly below the EU average, which logically limits capital investments. In case of disasters and emergencies, limited resources are diverted to emergency repairs and delayed administrative support combined with financial penalties is detrimental to grid development and power system reliability.
Power system reliability “has no price”. Any interruption, in addition to the direct costs of restoration, is associated with economic losses and social inconvenience due to the disruption of the electricity supply. The example of the recent blackout in Spain was highlighted during the roundtable, with initial estimates presenting losses of over €400 million for the country’s economy. Distribution network operators should be fully involved in the analysis of the causes and prevention measures, alongside electricity transmission operators, to avoid such incidents.
Electricity consumption in both Europe and Bulgaria is expected to grow, with the bulk of the energy going through electricity distribution networks. Significant investment is needed to ensure the sustainability of networks and security of electricity supply, with the main funding coming from consumers.
Grant funding for the distribution and transmission network is critical to their accelerated development. The EU focus so far has been on large cross-border projects, but bottlenecks in internal networks now also require priority attention.
Bureaucratic obstacles to network projects must be removed. Complicated construction and permitting regimes and cumbersome public procurement prolong implementation times for both transmission and distribution infrastructure, threatening the quality of electricity supply and the connection of new customer groups and zero-emission power producers.
Qualified staff in the electricity system is not enough – this is the opinion of all participants in the discussion. The low salaries in the sector and the low interest in electrical power specialties create an acute shortage of qualified engineers. The regulator should take into account the need for competitive salaries when approving operating costs.
The ambitions of the current government to turn Bulgaria into a “balancing monster” of electricity in the region clearly show the state’s desire to support the development of energy storage systems. These projects are crucial for the normal operation of electricity systems, which already encompass a huge number of decentralised variable RES generation. In order to achieve social and economic equity, there is a need for equivalent support for both public and private sector projects.

NECESSARY CHANGES

Include financial and regulatory incentives for upfront investment for network renewal and expansion, and for innovation. National legislation should put in place clear financial and regulatory mechanisms that incentivise this process. New regulatory instruments are needed to set the capital and operating costs of network companies to take account of the changing structure of these costs. For example, more ICT products are being offered as annual subscriptions rather than as a one-off licence purchase cost.
Tariff design should offer attractive business opportunities for investors. Network tariffs must guarantee predictable and adequate returns, otherwise private capital will shift to more lucrative sectors.
Simplification of administrative procedures in the permitting regimes for the construction of new network infrastructure (changes in the Law on Public Administration) to speed up the implementation of network projects. This is key to reducing the time from planning to commissioning of new infrastructure.
Streamlined and more flexible procurement. Legislation should allow simplified and fast procedures that shorten the lead times for network projects without compromising transparency.
Closer institutional cooperation – there is a need to strengthen the dialogue between energy and regulatory institutions, electricity distribution companies and the transmission system operator to ensure coordinated planning and investment.
Strategic planning of EU funding after 2027 The institutions responsible for planning EU funds for the country’s economic development should prepare and structure proposals to the EC for the inclusion of funds for investments in distribution networks in the next Multiannual Financial Framework. Network planning is a marathon, but to win it requires a good strategy in the early stages of the race.
Enhance the attractiveness of electrical engineering courses in secondary and tertiary technical schools. The state should support training and retraining programmes and modernise curricula to reflect the needs of a digitised energy system.
Competitive remuneration for experts. In approving operating budgets, the regulator should consider the need for decent salaries to retain and attract qualified staff.