ACER sees sharp rise in European grid investment

ACER has published a new assessment of Europe’s electricity distribution network investment trajectory, showing a marked rise in annual spending while warning that planning, regulatory, and digital weaknesses could still limit how effectively that money is turned into usable grid capacity.

The agency says annual distribution grid investment increased from €23.5 billion in 2021 to €35.3 billion in 2024, and is projected to approach €47 billion by 2027. The analysis covers 191 large distribution system operators across 25 EU member states and Norway. On the surface, those figures point to a strong ramp-up in network expenditure. Beneath them, the report describes a system that is spending more while still struggling with fragmented obligations, uneven capability, and mismatched incentives.

ACER says almost two-thirds of distribution system operators are exempt from preparing a network development plan, leaving at least 5% of EU customers served by operators outside that planning requirement. It also notes that 92% of DSOs are classed as small operators, yet together they serve only around 8% of the customer base. That matters because many of the obligations considered increasingly important for the energy transition apply only to larger DSOs, leaving a long tail of smaller operators with fewer formal requirements and often less institutional capacity.

Digitalisation is another fault line. Smart meter rollout is above 80% in most member states, but remains below 30% in six. That uneven progress has consequences well beyond metering itself. Without better visibility of load, generation, and network conditions, it becomes harder for DSOs to integrate flexibility, plan reinforcement efficiently, and move from static network operation towards more active control of increasingly complex local systems.

The report also identifies a capital expenditure bias in several countries, where remuneration structures still favour physical reinforcement over flexibility and demand-side alternatives. That does not mean cable, transformer, and substation investment is unnecessary; it plainly is. The issue is whether regulatory frameworks are neutral enough to let operators choose the most effective solution rather than defaulting towards whichever class of expenditure is easiest to recover.

ACER groups its recommendations under three headings: competences, transparency, and efficient investment. Among other steps, it calls for stronger mandates and resources for regulators and DSOs, broader and better-coordinated network planning, publication of multi-year capex and opex trajectories, stronger reporting on grid utilisation, and remuneration approaches that rely more on forward-looking expenditure plans with ex-post reconciliation.

The broader significance of the report is that Europe’s power transition is now unmistakably a network transition as well. Renewable deployment, electrified transport, building electrification, and distributed flexibility all depend on local grids that can absorb new flows and manage them intelligently. Spending is rising because it has to. The harder question is whether governance and operating models are changing at the same speed.

That is where ACER’s diagnosis becomes more pointed than the headline numbers alone suggest. The challenge is no longer to demonstrate that grids need investment. That point has already been settled. The challenge is to make sure the investment is planned consistently, regulated coherently, digitalised sufficiently, and delivered in ways that match the system Europe is actually building. ACER’s report is available here.