How underinvestment and delays in grid development are costing us all
As electricity demand rises and renewables flood the system, our grids struggle to keep up.
Nick Gosen, Senior Associate at KOMPAS VC, draws on conversations with grid operators, founders, consultants and policy experts to explore why grid expansion is slowing and where action is imperative. He also explains which investment areas hold the most promise and why some solutions are more likely to succeed than others.
“Europe’s power grids are not ready for the green transition.” This headline from the Financial Times is becoming a familiar refrain. Across Europe, stories about electricity price spikes, grid congestion, and wasted renewable energy are appearing almost daily. One message keeps surfacing: the energy grid is now the main barrier to the energy transition. The challenge is no longer just installing renewable energy assets—it is ensuring the grid can keep up. Policymakers are confronting this reality.
Clean electricity underpins industrial strategy, decarbonisation targets, and energy security. However, the wires of our grid, meant to carry it, are stuck in a different era, where demand was steady and generation was centralised. That is why upgrading the energy grid has become a core priority for governments, not just utilities and grid operators.
This challenge affects everyone. New housing projects are being delayed because the grid cannot handle more load, and factories cannot expand production for the same reason. Adding new EV charging capacity in populated areas is becoming a challenge. Electricity is central to economic growth, and strengthening grid infrastructure is essential to maintaining Europe’s competitiveness and sovereignty.
Demand Surge Meets Infrastructure Drag
Electrification is picking up speed. Globally, electricity’s share in final energy consumption is projected to rise from under 20% today to between 30% and 50% by 2050. To stay on track for the 1.5°C pathway, the IEA estimates that we must add 1,000 GW of renewable energy annually. To utilise this additional renewable energy capacity, the grid requires major investment.
In 2023, over $300 billion was spent on grid infrastructure worldwide. This represents half of the $600 billion that must be invested annually by 2030 to connect new renewable energy capacity and handle rising demand on existing infrastructure. This shortfall is not a one-off; it is part of an increasing structural gap. Companies invest heavily in electric vehicles, charging stations, heat pumps, and industrial electrification. But no one is paying for the grid expansion that these changes require. The result? More delayed projects and more volatile power prices.
Part of the problem is the grid’s growing complexity. It is inflexible and difficult to modernise. Electricity must be consumed almost as soon as it is produced. In recent years, energy storage and demand management have added some flexibility, but the capacity installed thus far has made only a small difference. On top of this, planning and permitting for grid upgrades take much longer than the pace at which capacity needs to be deployed.
Bottlenecks, Bureaucracy, and Backlogs
The slow pace of grid development is not caused by a single problem; it stems from many bottlenecks. Permitting takes too long. Key components are in short supply. There are not enough skilled workers. At the same time, grid operators and utilities face high costs while energy prices stay elevated.
To understand this better, it helps to take a more detailed look at each issue:
Regulatory and Permitting Drag:
In the EU and the US, securing approval to build ultra-high-voltage transmission lines typically takes five to ten years. By contrast, in China and India, the permitting process only takes two to three years. As a result, deploying these overhead power lines takes, on average, about four times longer in Western countries.
This gap is mainly due to more centralised decision-making in China and India, while lengthy public consultation periods play a major role in Europe and the US. Public opposition to new grid infrastructure is growing, driven by concerns about visual impact, effects on biodiversity, and land use conflicts.
However, the difference in approval timelines for distribution lines is much smaller since these lines are increasingly installed underground and face less resistance.
Supply Chain and Labour Constraints:
Transformer shortages have also become a major barrier to modernising the grid. In 2024, nearly a third of US utilities said they could run out of stock within a month. Combined with the global push to increase grid capacity, this is putting heavy pressure on aluminium and copper supplies. Roughly 20% of the worldwide aluminium and copper output is required to keep grid expansion on track.
A severe lack of skilled workers adds to this challenge. Building grid infrastructure requires specialised skills, and training new workers takes time. It will also take significant top-down support to attract more people to these professions.
The Financial Burden of Grid Expansion:
The good news is that both the EU and the US have launched new initiatives to encourage funding for grid expansion and improvement. In November 2023, the EU published its Grid Action Plan, estimating that €584 billion in investment is needed to upgrade, expand, and improve transmission and distribution networks by 2030.
This was followed in 2025 by the European Grids Package, which raised the projected investment required to meet grid demand to €1,207 billion by 2040.
Similarly, the US introduced Order No. 1920 in May 2024 to reform transmission planning and streamline site selection and permitting. In that same year, the US government allocated $14 billion for grid modernisation, while investor-owned utilities, including public funding, are expected to spend $92 billion on transmission construction between 2024 and 2026.
The bad news is that, despite all these efforts, falling short of the grid capacity required remains a risk. Rising energy prices driven by geopolitical tensions are making it harder for utilities to recover costs from customers.
Strategic Levers and Technological Advancements
As a specialist early-stage investor, we believe several emerging technologies can help accelerate grid expansion and increase the energy capacity of existing grid infrastructure. However, meaningful reforms to planning and permitting processes will also be essential.
As energy generation continues to outpace grid infrastructure, we’ll begin by examining the physical solutions that can help bridge this gap.
- Advanced Conductors: Companies like TS Conductor are replacing legacy transmission cables with high-capacity carbon-core conductors. Unlike first-generation advanced conductors, TS conductor’s AECC technology is fully compatible with standard installation and maintenance practices. These advanced conductors can double or triple the capacity of existing power lines by enabling more aluminum conductor material to be used within the original structure limits.
- Solid-State Transformers: A solid-state transformer is a device that uses high frequency switching techniques and power semiconductor devices to convert AC voltage from one level to another. They typically work in three stages: AC-DC conversion, DC-DC conversion (using high-frequency switching), and DC-AC inversion (to the desired output voltage and frequency). Solid-state transformers offer several advantages versus conventional transformers, including instantaneous voltage regulation, high controllability, and fault isolation. Challenges that can be identified are high costs, slightly lower efficiency, and reliability is expected to be lower in harsh conditions. Companies like Amperesand and Heron Power are the first movers in this space.
- Dynamic Line Rating (DLR): DLR solutions calculate the ampacity of power lines. Factors that affect the ampacity of a conductor include line current, cable tension, wind speed, solar radiation, and ambient temperature.
While this technology is seen as a relatively straightforward measure to increase grid capacity, there are several challenges and limitations: data accuracy, cybersecurity concerns, sensor installation requires coordination with multiple stakeholders, and infrastructure limitations – conductor ampacity is not always the limiting factor. However, utilities seem willing to adopt this technology. In the US, National Grid deployed Line Vision’s technology, which enabled a 10-20% increase in grid capacity of existing power lines.
Other technologies still in early validation include novel conductor coatings that increase conductor capacity by reflecting solar radiation and wireless short-range electricity transmission to replace certain distribution networks.
The main challenges related to physical solutions are the long sales cycles with utilities and grid operators due to low-risk appetite, accountability, and reliability requirements to minimise grid disruptions. Traditionally, deployment and adoption are often rooted in misaligned stakeholders and a lack of advanced technical expertise. Digital solutions offer ways to mitigate slow adoption and deployment.
- Digital Twins: Innovation in this area generally falls into two categories. The first includes solutions that use big data to build large-scale digital twins of grid infrastructure. Companies like Alteia, for example, can create digital replicas of entire state-level grids. These tools enable real-time monitoring, predictive maintenance, and better vegetation management.
The second category focuses on digital twins designed for simulation at the site or system level. For instance, one of our portfolio companies, Tibo Energy, allows stakeholders to model scenarios that can unlock additional energy capacity on a site while staying within existing grid connection limits.
- Next-gen Energy Management Systems (EMS) and Virtual Power Plants (VPP): EMS are designed to monitor, control and optimise energy flows within a system – whether that system is a home, building, factory, or an entire utility grid. Traditional EMS relies mainly on rigid, rule-based systems that struggle to meet the grid’s growing need for flexibility. Newer EMS technologies use additional data sources, such as real-time weather data, energy prices, and behavioural patterns, to better optimise energy use. For example, they prioritise specific energy assets at different times of day.
A VPP connects decentralised energy resources. This allows smaller, distributed resources that would otherwise be too small or unpredictable to participate in energy markets to work together and provide services like grid balancing, demand response, and ancillary support. The EMS typically serves as the technological backbone of a VPP.
Greater adoption of digital solutions is needed in the near term to offset the long development timelines of grid expansion projects and the need for extensive piloting of new physical solutions. Although current energy market volatility creates opportunities to profit from the gaps between demand and supply, new entrants are quickly increasing competition, making these arbitrage opportunities harder to capture. Solutions relying solely on price arbitrage will likely struggle to generate sustainable profits as energy markets mature.
Building Europe’s Grid Sovereignty
The headlines make it clear: outdated grid infrastructure is the main obstacle inhibiting Europe’s energy transition. But it doesn’t have to stay that way. Transmission and distribution networks have become strategic assets. Europe should treat grid development with the same urgency as semiconductors and defence.
The solutions explored here—advanced conductors, solid-state transformers, dynamic line rating, digital twins, and next-generation energy management systems—are not incremental upgrades. They are systemic enablers that can transform the grid from a constraint into the foundation of a cleaner, more reliable, and more affordable energy system.
At KOMPAS, our investment thesis focuses on three priorities: decarbonisation, productivity, and resilience. The grid challenge connects them all. That’s why we invest in solutions that expand capacity, speed up deployment, reduce constraints, optimise energy flows, and make the grid smarter.
Tackling these challenges is a time-sensitive opportunity. Investing in grid innovation now can deliver long-term returns and strengthen Europe’s security, sovereignty, and competitiveness. To respond to the Financial Times headline: Europe’s power grids can be ready for the green transition—if action starts today.
By Nick Gosen, Senior Associate
