01
The electric grid investment paradox

01 The electric grid investment paradox

Introduction

The paradox is that a lack of grid investment is seen as slowing down the energy transition, but those same networks have very low utilization rates.

Electricity grid investments are matching accumulated solar and wind investments
Electricity consumption is expected to at least double in the next two decades
Grid operators are struggling to connect distributed energy resources, EV charging and data centres
Grid balancing and meeting peak demand are increasingly challenging, with signiﬁcant wastes of green energy and money
Negative energy market prices are becoming more common
At the same time, the average Transmission System Operator (TSO ) has a grid capacity utilization rate of 40% - 50% and Distribution System Operators (DSOs) have only a mere 8%.

How can we ﬁx this paradox and ﬁnd the better trade-oﬀ between grid reinforcement and modernization (digitization)?

What solutions are available?

Rene Kerkmeester

Global Smart Grid leader, Capgemini

As a leader of the global Energy Practice, Rene has worldwide responsibility for Capgemini business around the digital transformation of energy grid operations and related platforms.

Philippe Vié

Senior Advisor Energy Transition and Utilities, Capgemini

Philippe has led the Capgemini Energy sector and now serves as an advisor for Capgemini, as well as large utilities or equipment suppliers. Philippe has been observing the market for many years and has sponsored the WEMO publication for more than a decade.

01 The electric grid investment paradox

The key question

What is the appropriate trade-oﬀ between reinforcement and modernization, and what are the solutions to ensure grids maintain their resilience service whilst increasing their eﬃciency?

Grid capacity utilization rates
are low

Research evidence suggests that average capacity utilization in low voltage networks is below 10% and in transmission grids less than 50%. Electric grids are oversized, notably in Europe.

Poor and long DER connection

Utilities are struggling to deliver the related projects leading to many months of delay and client dissatisfaction. The key bottlenecks are permitting and human resources. The pipeline of new connections required to connect renewables sources or EV charging infrastructure is made of hundreds of thousands of demands every year, with a double-digit growth.

Grid balancing and peak management are more and more complex

The transition is making the energy supply landscape less predictable and more volatile, and demand is becoming less constant due to electric heating and transportation. Adding more grid capacity is unlikely to be timely enough and will certainly be too costly to be the only measure.

Diﬃcult to meet the electricity demand growth

All analysts are predicting a doubling of electricity demand by 2050 and roughly doubling the grid capacity, adding about 100M kms of lines and 20M transformers. All of this despite signiﬁcant progress in energy eﬃciency measures.

How to make more out of existing
grid capacity?

Gain better insights into grid status, through better data management
Improved asset investment planning
Accelerate investments and implementation
Implement market solutions, such as innovative tariﬀs and demand side ﬂexibility
Smarter digital solutions enabling grid control and automation

01 The electric grid investment paradox

Where do we stand in terms of grid investments? What is the ﬁnancial impact of the main constraints?

FIGURE 1
Investment in power grid infrastructure and share that is digital, 2021-2025

Source: IEA

There has been a signiﬁcant 9% YoY (2024/2023) increase in electric grid investments

US is leading (~$110bn pa)
followed by China (~$90bn)
then Europe (~$70bn)

Smart Grid spends as of 2024 ~$120bn

TSO:
- 85% reinforcement
- 15% digitization (Smart Grid)
DSO:
- 70% reinforcement
- 30% digitization (Smart Grid)

Despite increasing investments ($700bn pa forecasted by 2030), reinforcement work takes many years after a Final Investment Decision, with the consequence of slowing down the energy transition.

01 The electric grid investment paradox

Negative market prices and increased renewable curtailment show the urgent need for a faster grid modernization

Fast growing number of negative market prices

Number of negative hourly wholesale prices on selected day-ahead trading platforms in Europe.

Fast-growing number of negative wholesale market price episodes are showing the imbalance between insuﬃcient demand and electricity generation.

Grid balancing activities are more and more critical

FIGURE 2
Number of negative hourly wholesale prices on selected day-ahead trading platforms in Europe

Source: European Commission, ENTSO-E

01 The electric grid investment paradox

Curtailment rate increases reveal a signiﬁcant and concerning cost for generation operators and states / countries economies

FIGURE 3
Curtailment rates and VRE share

Source: IEA

Curtailment rates are increasing with the renewable share, from 3% in China to 7%-8% in UK, Germany or Spain, through about 5% in the US.

Grid balancing activities are more and more critical

01 The electric grid investment paradox

Grid capacity utilization rates are quite low …. DSO <10%, TSO <50%. Off-peak grid additional capacity can be leveraged

Some publications point to low grid utilization numbers: average capacity utilization in low voltage networks could be well below 10% and in transmission grids well below 50%.

The European Joint Research Centre (JRC) concluded that distribution grids were usually oversized in terms of transfer capacity and not automated or digitalized.

Oversizing of the grid capacity and transformers has been used to reduce losses and it makes the grid more reliable. When more grid capacity is needed, innovative grid technologies should be considered alongside traditional grid investments.

On 17 April 2025 TenneT announced the “discovery” of 9.1-gigawatt additional off-peak capacity - a replicable case study...

FIGURE 4
Transformer capacity per LV consumer

Source: Distribution System Operators observatory 2018, JRC113926

TenneT, the Dutch / German Transmission System Operator, provides 9 gigawatts of extra capacity on the high-voltage grid for customers on the waiting list. New analysis shows that up to 9.1 gigawatts of power is available on the grid at oﬀ-peak times. Thanks to the new time-dependent contract, more than 40% of the current national peak electricity demand will be made available to interested customers on the waiting list who are directly connected to TenneT’s high-voltage grid.

01 The electric grid investment paradox

Beneﬁts of capacity management systems…

Transmission and distribution grid companies need to embrace smart grid technologies to better perform their traditional capacity management steps:

Accurate and real-time data collection and real-time monitoring of current load, maximum capacity, generation capacity and transmission capacity.
Load Forecasting of historical and weather data as well as considering economic factors.
Capacity calculation, scenario analysis and real-time decision making.

… and many other Smart Grid solutions

AMI data to enable faster outage location
Distributed Energy Resources integration
Automated grid management
Demand Response Systems – load shift, Dynamic Line Rating
Predictive maintenance
Advanced asset management
Digital Twin …

… including improved Asset Investment Planning

This planning needs to consider new dimensions alongside the existing asset condition and criticality measures, such as:

The future demand prediction
Geopolitical conﬂicts and tensions
Technological evolution
New energy systems and services such as micro-grids
Changing load curves and peak hours
Changing supply mix
Regulatory pressure

FIGURE 5
Improved Asset Investment Planning is a critical component

Source: Cosmotech

01 The electric grid investment paradox

The ﬂexibility markets are enablers for unlocking
grid capacity

The ﬂexibility markets should play a signiﬁcant role in avoiding or deferring grid investments by optimizing the use of existing infrastructure and resources.

Demand response behaviour can be established at scale.
Other grid services such as frequency regulation and voltage support can allow the grid to run at higher capacity without losing its reliability.
Introduced dynamic pricing regimes have already proven very successful in mature North European power markets, as well as in the US.

Subject to the right incentives, customers appear to be very willing to adjust their daily electricity usage patterns.

Grid investments can be reduced by introducing appropriate market-based ﬂexibility solutions...

FIGURE 6
Demand side flexibility

Demand Side Flexibility can enable savings of between €77.6 billion and €203.6 billion (i.e. between 27% and 80%) at EU 27 level between 2023 and 2030"

Source: DNV 2030 Demand-side ﬂexibility report

01 The electric grid investment paradox

Speed up investment decisions, implementation and eﬃciency

For any reinforcement or grid modernization, processes simpliﬁcation and accelerated projects delivery are needed and oﬀer a performance improvement gap opportunity.

A proven potential of:

Delay reduction of up to 50%

TOTEX improvement by up to 20%

Customer and stakeholders’ satisfaction improvement

Source: demonstrated results out of various operational excellence projects REX (notably on the new connection process)

01 The electric grid investment paradox

Our Convictions

1

There is no obvious need to generally oversize electric grids to meet any potential peak load. Actual grids are over-dimensioned or, capacity wise, under-used, most of the time.

2

The implementation of fully digitized capacity management systems is a pre-requisite for optimization.

Grid capacity can be unleashed by many digital solutions such as Dynamic Line Rating
Flexibility and storage need to be better and faster integrated in the energy system to optimize the use of the available infrastructure

3

Asset Investment Planning is critical to making accurate investment and trade-oﬀ choices.

4

Leveraging data is key. AI, GenAI and Agentic AI are bringing a new range of solutions to get the most out of grid data and existing grids at the end.

5

When no solution other than grid reinforcement exists, process simpliﬁcation and accelerated grid reinforcement project delivery oﬀer a performance improvement gap opportunity.