Europe must invest $2.2tn to keep the lights on, IEA says

Europe must find a way to stimulate massive new investment in energy infrastructure to ensure the light stays on, warns a new report. It will need to invest around $2.2 […]

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By Priyanka Shrestha

Europe must find a way to stimulate massive new investment in energy infrastructure to ensure the light stays on, warns a new report.

It will need to invest around $2.2 trillion (£1.3tn) in the power sector by 2035 to replace ageing infrastructure and meet decarbonisation goals as well as install 100GW of new thermal plants, according to the International Energy Agency (IEA).

However it suggests Europe won’t be able to attract that investment with the current market rules in place as wholesale electricity prices are more than 20% below the level necessary to spur investment.

The IEA said: “The investment required to maintain the reliability of Europe’s electricity system is unlikely to materialise with the current design of power markets. If this situation persists, the reliability of European electricity supply will be put at risk.”

It suggests that part of the solution involves higher revenues to thermal generators which potentially means higher prices to consumers.

That highlights “the difficulties facing European policymakers as they seek to make simultaneous progress toward ensuring energy security, environment sustainability and economic competitiveness”, the report added.

Looking at the global picture, countries across the world will have to invest more than $48 trillion (£28.6tn) by 2035 to meet the growing demand for energy, it suggests.