Policy options
End Russian gas imports. Prospective changes in international market dynamics present the EU with an opportunity to definitively end its historic reliance on imported Russian gas. A wave of new LNG supply is on the horizon, set to be the largest in the history of LNG markets. By 2030, based exclusively on projections for projects that have reached a final investment decision or are under construction, nearly 300 billion cubic metres (bcm) a year of new liquefaction capacity will come online globally, an increase of 43 per cent on global capacity in June 2025.
Over half of this new capacity will be in the US, with just under 20 per cent coming from Qatar; a dozen other countries will account for the remaining 30 per cent. This should mean that, within the next two years, the global LNG market will be sufficiently well supplied to enable the EU to find alternatives to Russian gas without having to pay a substantially higher price. This is a very different situation to the one in which the EU found itself following Russia’s invasion of Ukraine in 2022.
Challenges to making a decisive and permanent break with Russian gas will remain, however. Hungary and Slovakia firmly oppose halting their gas imports via TurkStream, the pipeline through which the remaining flows from Russia are routed, and plan to mount a legal challenge to the full ban set to take effect in the autumn of 2027. There is also the question of contractual purchase commitments: it is unclear whether all EU member states will be willing and able to compel companies operating in their jurisdictions to break long-term LNG contracts with Russian suppliers.
Prioritize a well-functioning LNG market. The EU does not need to intervene in the market by signing bilateral agreements, such as the $750 billion commitment to buy American energy products, or place undue obligations on member states. For the most part, its focus simply needs to be on supporting a well-supplied and fully functional LNG market. As the global gas market rebalances, the European Commission needs to phase out storage obligations, which distort the market in favour of sellers (by sending a signal that buyers will be required to source significant supplies on the spot market during the summer months, before the high-demand winter season).
Increase market-monitoring capabilities. One consequence of the 2022 gas crisis was that the role of Europe in global LNG markets changed significantly. In 2014, the EU27 had imported 33.8 bcm of LNG, which accounted for 10.1 per cent of total global LNG imports. In 2024, the same countries imported 111.7 bcm of LNG and their share of the total had risen to 20.5 per cent. China, by comparison, imported 105.2 bcm (19.3 per cent of the total) in the same year.
As they have become much bigger importers of LNG, European buyers have gone from being passive players in the global LNG market to active competitors (largely competing against Asian importers). This changed role requires more proactive market monitoring and a deeper understanding of market dynamics on the part of EU member states and the European Commission.
Already, progress has been made on this front. The European Union Agency for the Cooperation of Energy Regulators (ACER) now produces an LNG monitoring report, and the European Court of Auditors has produced a study articulating the lessons from the 2022 gas crisis. The International Energy Agency (IEA) produces quarterly gas market reports and an annual gas security assessment. Europe is also well served by a strong corporate presence in the global LNG market, and by a number of independent think-tanks that monitor gas market developments.
Broadly speaking, these developments bode well for management of the risks associated with a greater reliance on LNG imports to meet EU gas demand. Nevertheless, the EU requires a change of mindset to acknowledge the centrality that LNG will have for the continent’s energy security for some years to come; this also means recognizing that LNG market dynamics are very different to those for pipeline gas.
Coordinate with other LNG importers. Above all, Europe’s changed role presents opportunities to coordinate responses with other importers. An existing, Japan-led international arrangement provides one potential mechanism to achieve this. In 2012, in the aftermath of the 2011 tsunami and Fukushima Daiichi nuclear disaster, Japan turned to the global LNG market to compensate for the loss of nuclear power generation. To minimize market disruption and ensure supply, the Japanese government convened the first meeting of the LNG Producer Consumer Conference (LNG PCC). The aim of this common platform was to deepen cooperation between LNG producers and consumers.
Europe’s changed role in the global LNG market presents opportunities to coordinate responses with other importers. An existing, Japan-led international arrangement provides one potential mechanism to achieve this.
As the LNG PCC has become more established, its reach has widened, and for the last three years the event has been co-hosted with the IEA. The European Commission and LNG-importing EU member states are already involved in the conference; they should use this forum to pursue greater coordination with other importers, in support of European supply needs. Other forums such as the G7 and G20 also provide fertile ground for energy diplomacy, and the EU should pursue cooperation through these avenues too. This push for cooperation should be informed by a full, European Commission-led review of the EU’s energy diplomacy towards other LNG importers, especially Asian buyers most affected by its LNG strategy.
Remain vigilant to global gas market dynamics as demand falls. The very high gas prices in the summer of 2022, following Russia’s invasion of Ukraine, led to dramatically reduced gas demand in the EU. Even today, EU gas demand has not returned to pre-war levels and is unlikely to do so.
A number of factors not directly related to the 2022 price shock are also behind the reduction in demand. They include: replacement of gas-fired electricity generation with renewable generation and, to a far lesser extent, coal-fired generation; efficiency improvements; mild winters and rising energy poverty; and permanent demand destruction from the closure of factories and industrial facilities that previously consumed gas. This latter trend has raised concerns about deindustrialization in energy-intensive sectors.
There is considerable uncertainty about the future trajectory of European gas demand. Demand will almost certainly continue to fall, which, this paper argues, is necessary to improve Europe’s energy security – but how quickly it will fall is unclear. One recent study suggests that it could fall a further 7 per cent by 2030. However, as gas becomes less significant as a primary mode of power generation, its importance will grow as a source of intra-seasonal energy storage and as a back-up for variable wind and solar generation, at least in the medium term, until there is sufficient storage in the energy system. In some electricity markets in the EU, the price of gas may continue to set the price of electricity at least some of the time.
Thus, even though gas demand will likely continue to fall, and the EU may largely wean itself off Russian imports by the end of 2027, the bloc will still be exposed to global gas market volatility – and to the effects of geopolitics on supply, demand and prices – for some time yet. Consequently, as noted above, the EU and its member states will need to remain vigilant to factors that might impact the global supply of LNG and the price of LNG on spot markets; until the shock of 2022, these were not issues the EU had had to worry about.
Oil
The problem: high risk of price volatility in coming years
The EU’s oil supply is better diversified than its gas supply. Whereas the EU’s top three import partners for gas accounted for 69 per cent of the bloc’s gas imports in 2024, the EU’s top three oil import partners (the US, Norway and Kazakhstan) accounted for 41 per cent, with nine other countries, including Saudia Arabia, Nigeria and Brazil, supplying between 3 and 8 per cent (see Figures 5 and 6). However, this healthy diversity of supply would inevitably decrease if purchases of oil from the US were ramped up in line with the pledges of the US–EU trade deal of July 2025 (see Box 1).
Globally, oil supply has been growing, with Brazil, Canada, Guyana and the US among the countries increasing output. Meanwhile, demand growth has been slowing, due to stagnating demand in advanced economies and the rapid adoption of EVs in China. This has led to expectations of an oversupplied oil market in the coming years, which would be advantageous for the EU’s security of oil supply. The EU is also relatively well prepared for sudden oil shocks: as of September 2025, the 20 EU member states that are also members of the IEA were all meeting the central IEA oil security requirement to hold in reserve an amount of oil equivalent to at least 90 days of demand.
For the EU, oil supply security would thus seem to be less of a concern than price volatility, which has been acute in recent decades, is exacerbated by geopolitical tensions, and imposes unpredictable and often crippling costs on governments
and citizens.
Conflict in Europe and the Middle East, combined with a global economic outlook characterized by ‘exceptionally high uncertainty’ according to the IMF, suggests that volatility in oil markets will continue. Moreover, when global oil demand eventually reaches a structural peak and starts to decline – a moment some forecasters see happening in the next few years, although the timing is highly contested – a cooperative and orderly market adjustment is unlikely. Partly, this is because each producer will naturally be keen to maximize the monetization of its oil resources by ‘pumping the last barrel’, as industry jargon puts it.
This competition between oil producers to remain in the market for as long as possible is not conducive to market stability. It increases the risk of supply–demand imbalances and sudden price shocks. Furthermore, the lower prices currently forecast in the short term could squeeze out higher-cost producers in the medium term, which in turn could lead to a concentration of global oil supply among a smaller number of the lowest-cost producers in the longer term. In this scenario, an EU still dependent on oil would be potentially exposed to the weaponization of oil supplies, much as it was to Russia’s weaponization of gas supplies in 2022.
Policy options
Reduce unnecessary oil demand. The single most effective way for the EU to address the energy security risks from continued crude oil price volatility would be to reduce the amount of oil products member states consume, and therefore states’ exposure to market fluctuations. This should begin with reducing use of oil in the transport sector, which accounts for two-thirds of all oil consumed in the EU.
Progress on reducing oil demand has been slow, however. The sharp fall in gas demand following Russia’s invasion of Ukraine was not replicated for oil: while gas demand fell by 15 per cent between February 2022 and February 2023, relative to the same period one year earlier, oil demand actually increased by 2 per cent within the same timeframe, returning to levels seen before the COVID-19 pandemic.
No single policy can achieve the change required, but the key measures to reduce oil use are well known. The EU is seeking to push through ‘modal shifts’ in transport and travel patterns through its Sustainable and Smart Mobility Strategy; this strategy includes a target to double rail freight traffic by 2050. The IEA advocates reducing vehicle speed limits, promoting more efficient use of trucks, discouraging unnecessary business travel, and cutting the cost of public transport relative to private vehicle usage.
A good example of policy innovation in this area is Germany’s Deutschland-Ticket, introduced in 2023, which entitles holders to unlimited travel across the country’s public transport network for a low flat fee. The scheme has proven enormously popular with both the public and politicians: in September 2025, it had 14 million active subscriptions, and was extended to 2030 with unanimous approval from Germany’s federal states. Initiatives like Deutschland-Ticket have the potential to reduce oil demand, by incentivizing people to switch from driving cars to taking buses, trams and trains. However, such initiatives must be accompanied by robust investment in public transport infrastructure, especially rail networks, to ensure that services offered to travellers can be reliably provided.
Ensure driving an EV is both affordable and practical. Electrifying road transport will also be essential if the European Commission wishes to put oil consumption on a sustainable downwards trend. The prohibitive upfront cost of EVs has slowed the switch from petrol and diesel vehicles, and tariffs on EV imports from China will exacerbate this. But change is perhaps on the way. European automakers have largely focused on selling high-end EVs to date, but a number of firms launched cheaper models in 2025 as new EU targets have taken effect. These car firms are seeking to keep pace with Chinese manufacturers, which are competitive even with tariffs applied. The trend towards European production of cheaper EVs should continue to push down the prices of EVs and make such vehicles accessible to a wider range of consumers.
However, progress on this front will slow if, as proposed by the commission, the EU weakens its planned 2035 ban on sales of new petrol and diesel vehicles. Allowing the continued sale of internal combustion engine and plug-in hybrid vehicles, even in small quantities, introduces uncertainty for investors in the emerging EV ecosystem, while enabling new investments to be made into manufacturing vehicles that rely on oil rather than electricity.
One way to accelerate the transition would be for EU member states to further shrink the ‘electric premium’ by offering consumers means-tested purchase subsidies. These subsidies could be combined with other incentives, such as exemptions from road taxes and parking charges; Norway’s success in promoting EV adoption illustrates the potential of this approach.
EV sales in the EU are strongly correlated with the availability of charging infrastructure. Consumer incentives should therefore be accompanied by measures to encourage the rapid build-out of public, high-speed EV chargers. The European Commission is supporting this with co-funding of €1 billion for development and installation of charging infrastructure under the Alternative Fuels Infrastructure Facility. The commission should encourage member states to offer their own support measures to ensure even progress across the EU towards the central target of the Alternative Fuels Infrastructure Regulation: the presence of a public EV charger with an output of at least 150 kW every 60 kilometres along Europe’s major road transport arteries.
An accelerated rollout of public EV charging facilities must be accompanied by robust enforcement of standards introduced by the EU’s updated Network and Information Security Directive (NIS 2). NIS 2, which came into force in October 2024, requires operators to adopt cybersecurity risk management measures, report incidents to national authorities, safeguard customer data, and ensure their vendors and service providers comply with the same security standards.
Rollout of low-carbon technology
The problem: high dependence on China
Moving from fuels such as oil and gas to technologies such as solar panels and EVs – though critical to the EU’s prospects for achieving future energy security – presents a new set of challenges. The thorniest of these relate to the commanding technological lead and dominance of global markets held by one country – China – for most of the products that the EU needs for its energy transition. The EU sees China as an ‘economic competitor’ and a ‘systemic rival’, but also as a ‘partner for cooperation’.
There are fears that China might exploit its dominant position as a supplier of energy technology to threaten European energy security in the way Russia did with gas exports in 2022. Amid disputes with trading partners, and citing national security concerns, China imposed (though subsequently loosened) export controls on intermediary products on several occasions in 2025, including on rare earth elements, and on chips needed for automotive manufacturing. The specific risk to the EU’s energy security arising from this should not be overstated, however. For one thing, as discussed, the risk profile of renewable energy technology is qualitatively different to that of fuels, as supply interruptions are much less immediately consequential for the former than for the latter. A deliberate curtailment of exports of finished solar panels or batteries from China also seems unlikely, given the country’s high production capacity and the importance of such exports for the Chinese economy. Cyber risks seem more pertinent (see ‘Strengthening the electricity grid’, below).
Nevertheless, it would be prudent for the EU to diversify – to the extent possible – its supplies of finished products such as solar modules, components such as silicon wafers (as envisaged in the Net Zero Industry Act), and raw materials like lithium, in both processed and unprocessed states (as envisaged in the Critical Raw Materials Act). The Critical Raw Materials Act stipulates that no more than 65 per cent of the EU’s annual consumption of a given raw material at any stage of processing should be sourced from a single third country. This is especially important in the context of the current highly uncertain global trade environment.
A more significant risk is simply that Chinese imports will continue to outcompete European-made products, potentially resulting in further factory closures in the EU and damaging the EU’s ability to manufacture the products needed for its own transition. Such an outcome could jeopardize the wider energy transition by shrinking the political coalition needed to support it, as businesses would see fewer opportunities in the transition and citizens could associate it with job losses and deindustrialization.
On the other hand, restricting Chinese imports would increase costs for project developers and consumers, potentially constraining the development of sectors like renewable energy installation and maintenance, and ultimately slowing progress towards a more secure energy system. In practice, measures that protect or prioritize domestic production will be more justifiable in some sectors and instances than in others. Combining necessary protections with sufficient market openness to maintain the impetus of the energy transition will be a matter of getting the policy balance right.
Policy options
Provide selective industrial support. The EU’s capacity and competitiveness relative to international rivals vary significantly by product in the renewable energy and low-carbon manufacturing sectors. EU-level and member state support for manufacturing needs to be calibrated to the dynamics and needs of each sector. Support for a given product should depend on its strategic importance, economic contribution and industrial viability; decisions will also need to factor in the ways in which local production, relative to importing, contributes to energy security.
In the case of solar panels, industrial support could usefully be geared towards developing the next generation of photovoltaic (PV) modules, which might be based on perovskites or other thin-film technologies to reduce weight and increase efficiency. Although it would also be prudent for the EU to maintain some manufacturing capacity for today’s silicon-based panels, mass production of these should not be a policy priority. Rather, policy support should favour innovation.
On the other hand, there is good reason to support solar inverter manufacturing in the EU. Inverters are the ‘smart’, internet-connected parts of solar power systems that receive software updates and transmit data (in contrast to the ‘dumb’, static panels). Local production of inverters, then, can play a role in mitigating cybersecurity risk in a way that local production of panels cannot. Unlike with panels, the EU has substantial inverter manufacturing capacity: 96.4 GW in 2025, more than enough to supply the 68.7 GW of installations needed annually between 2026 and 2030 to meet the EU’s target of 750 GW of solar capacity deployed by the end of the decade. However, local inverter manufacturers have been losing share of the EU market to Chinese competitors in recent years. Cognizant of this, the European Commission has proposed possible measures to ‘price in’ the advantages of locally produced inverters, including through non-price criteria in renewable energy auctions and public procurement under the NZIA.
Policy support is also needed for the training of solar panel installers and technicians. Work in this area accounts for a far larger share of solar sector jobs (824,000 in 2024, or 95 per cent of the total) than manufacturing does (41,000 jobs, 5 per cent). Where solar power is concerned, it is a lack of qualified people, rather than a lack of panels, that is likely to slow the EU’s transition. The European Commission should increase support for skills development programmes in the solar and wind sectors in particular, to avoid the ‘green skills gap’ becoming a major bottleneck to the EU’s transition.
The EU has a significant wind power manufacturing sector, which supplies nearly all of the bloc’s equipment needs while also exporting equipment to other markets. The European Commission estimates that the sector could provide up to 936,000 jobs by 2030, more than three times today’s total. However, manufacturers in this sector face fierce competition from Chinese companies, and continue to struggle with high capital and supply-chain costs. Policy support should be geared towards ensuring fair competition, predictable long-term returns for developers, and resilient supplies of key inputs such as rare earth magnets. The commission’s proposal, under the RESourceEU Action Plan, to restrict exports of rare earth magnet scrap and waste, with the goal of encouraging recycling capacity of this key input within the EU, would be a sensible and practical move.
The EU has seen significant investment in battery manufacturing capacity, and should build on this base as EV usage continues to grow. The automotive sector is a major EU employer, with vehicle manufacturing – internal combustion engine and electric – accounting for 2.6 million direct jobs. Only around one in five cars produced in the EU in 2024 was electric, but this share will grow – albeit at a slower pace than previously forecast if the strong policy signal of the EU’s ban on sales of new petrol and diesel vehicles from 2035 is weakened as per the commission’s proposal. The EU target, as stipulated in the NZIA, of manufacturing 40 per cent of strategic net zero technologies domestically by 2030 also constitutes a potentially powerful driver of demand.
To be clear, building ‘gigafactories’ for the assembly of batteries is not enough: the EU will need to strengthen the entire battery supply chain by supporting market development at each stage. This includes cathode and anode production, critical mineral refining and processing, and critical mineral extraction. The need for the EU to diversify its critical mineral supply chain has become clearer in the past year, as China has expanded its export control regime, including by introducing licence requirements for exports of battery components and precursors, rare earth magnets and associated production technologies.
Support global mineral supply-chain governance. As discussed above (see ‘New energy dependencies’, Chapter 1), the EU’s limited geological endowment obliges it to look beyond its borders for raw material inputs. Stockpiling critical minerals, an option being pursued by the European Commission under RESourceEU, offers only a short-term solution and risks increasing price volatility; the commission should also back the development of international governance mechanisms for minerals. Such mechanisms could coordinate supply and demand in a transparent and equitable manner, enabling consumers such as the EU to manage supply-chain risks while protecting resource-rich countries from coercion and ensuring exporting countries access real benefits. Another critical area of focus should be on developing domestic European capabilities and capacity in enhanced recycling techniques, as this will reduce the need for raw material imports (of copper in particular – see ‘Strengthening the electricity grid’, below) in the long term.
Collaborate with non-EU firms. Perhaps the greatest challenge will be ensuring that the EU’s low-carbon technology manufacturing sectors keep up with the blistering pace of technological development. Battery chemistries are rapidly evolving, for example. Public and private investment must account for the risk of capital misallocation and stranded assets if investment is directed towards technologies or manufacturing processes that quickly become obsolete. One strategy to mitigate this risk would be to enter more partnerships with leading companies from outside the EU – including Chinese firms. Such an approach would have the potential both to create local jobs and to bring industry in the EU closer to the fast-moving frontiers of technological innovation.
However, the EU should not settle for being an assembly hub: joint ventures with leading non-EU firms must be carefully structured to ensure the exchange of expertise and technology, and to facilitate joint innovation. Joint ventures, where established, should require that operational control remains in the EU; they should also limit foreign data access, as per the General Data Protection Regulation (GDPR) and the NIS 2 Directive on cybersecurity.
Strengthening the electricity grid
The problem: slow grid development constraining potential of renewables and electrification
Europe’s energy system was designed largely with combustible fuels in mind. The idea was that homes would be heated by burning gas, that vehicles would be propelled by burning oil, and that electricity would be generated by burning coal (and later by burning gas, as well as by nuclear fission) in large power plants. The electricity produced by these plants was then sent to consumers via national grids and local distribution networks.
Given the EU’s need, as this paper has argued, to transition from a fuel-based energy model to a technology-based one, the assumptions on which the energy system has been built need to be updated. Policymakers must plan for a future in which electricity becomes the dominant energy carrier, for example as heat pumps replace gas boilers and as EVs replace vehicles powered by internal combustion engines. A very large share of this electricity will need to be generated from variable renewable sources.
The underlying system required to achieve this vision is not being developed fast enough. Electricity’s share of final energy consumption in the EU has stalled in recent years, at around 22 per cent. New renewable energy projects are facing long waits to connect to the electricity grid: as of 2024–25, projects accounting for 1,700 GW of generation capacity were stuck in connection queues across 16 member states. With European grids unable to absorb all the electricity produced by renewables in member states, this creates opportunity costs while imposing direct financial costs on transmission system operators (TSOs) due to the forced ‘curtailment’ (i.e. deliberate reduction) of electricity generation. In 2024, management of grid congestion added more than €4 billion to the cost of running the EU’s electricity grid.
With European grids unable to absorb all the electricity produced by renewables in member states, this creates opportunity costs while imposing direct financial costs on transmission system operators due to the forced ‘curtailment’ of electricity generation.
One example of the potential consequences of outdated grid infrastructure was the power outage, Europe’s largest in two decades, on the Iberian Peninsula on 28 April 2025. A report published by an expert committee set up by the Spanish government found that the blackout had a ‘multifactorial origin’, with the proximate cause identified as a series of large variations in voltage, inadequately cushioned by voltage-control mechanisms, which triggered a cascade of generator disconnections and cut off Spain’s interconnection with France. The blackout brought into sharp focus the importance of a well-planned, well-managed and resilient electricity grid. It is likely no coincidence that Spain invests less in the grid relative to its spending on renewable generation – investing 30 cents in the former for every €1 it spends on the latter – than any other country in Europe.
As Mario Draghi, a former prime minister of Italy and former president of the ECB, emphasized in his report on the future of European competitiveness in 2024, grids are critical enabling infrastructure and their importance to energy security can hardly be overstated. The commission’s European Grids Package and accompanying Energy Highways initiative, both proposed in December 2025, represent an important step forward. Significantly, the package introduces a centralized, cross-European dimension to grid planning, an activity which to date has taken place almost entirely at the national level. Modelling by a consortium of European think-tanks found that investment coordination and independent top-down planning would significantly reduce the amount of infrastructure needed to transform the EU’s energy system in line with decarbonization goals, and could bring down total costs to 2050 by as much as €750 billion.
Policy options
Promote best practice in connection processes. As the European Commission recognizes, the most pressing priority is to speed up permitting processes for new grid infrastructure – a highly complex challenge involving myriad stakeholders and trade-offs, notably around local environmental impacts. The European Grids Package includes legislative proposals to address this, including by streamlining environmental assessments and introducing time limits for permitting processes. However, getting the infrastructure built is only part of the challenge. Europe’s TSOs, with the support of member state governments, need to update the processes for connecting generation sources to the grid, and expand the use of scenario planning to ensure these operations facilitate, rather than constrain, rapid development of the energy system. Reforming legacy connection processes would reduce the time taken for genuine projects to connect to the grid, by preventing speculative projects with little chance of being built – so-called ‘zombie projects’ – from taking up space in the queue. Revising outdated national energy plans to account for increased use of renewables – and integrating market and technological trends in such plans – would permit anticipatory investment in the grid. With many examples of good practice already on display across the EU, the European Commission needs to coordinate such efforts and ensure the lessons from them are understood and widely communicated.
Support copper recycling. Policymakers must pay close attention to the evolving demand for materials that the grid’s expansion will necessitate. According to Eurelectric, the distribution grid that serves the EU27 plus Norway will need to grow from 10 million kilometres of cables today to nearly 17 million kilometres by 2050, and the number of transformers will need to double, just to meet the EU’s existing energy transition goals; this will require large quantities of copper. With resistance to new mines, including copper mines, growing around the world, and with global copper supply increasingly falling short of demand, the EU needs to boost its already impressive rates of copper recycling. Options might include incentivizing increased end-of-life collection and designating new recycling facilities as favoured ‘strategic projects’ under the Critical Raw Materials Act, as has been done with Atlantic Copper’s ‘CirCular’ project in southwest Spain. Such efforts should be accompanied by full implementation of the EU Circular Economy Action Plan, including legislating for product lifetime extensions, remanufacturing and refurbishment, to reduce the need for primary copper extraction.
Boost cybersecurity. Cybersecurity will need to be a priority for EU policymakers as the electricity grid becomes larger and more digitalized, as more generation assets connect to it, and as the number of connected devices grows. A coordinated, ‘resilient by design’ approach should guide the energy system’s development. Modernization and expansion of the ageing European grid will provide an opportunity to make the energy system more secure from the ground up, for example by integrating state-of-the-art network architecture principles so that unstable, damaged or compromised zones of the grid can be temporarily isolated.
Regulatory gaps will also need to be filled. Recent cybersecurity regulation, such as the EU’s Cyber Resilience Act, is insufficiently tailored to the specificities of renewable energy. Nor does such regulation address the cybersecurity risks associated with the use of distributed networks of small-scale generation assets such as rooftop solar panels.
Remote operational access to devices (such as solar inverters and wind turbine controllers), software hosting and access to operational data should be restricted by default to entities in the EU or other jurisdictions that can, at a minimum, guarantee equally strong security protocols and enforcement. Access to equipment, systems and data by non-EU entities should be permitted on a highly selective basis, for tasks essential to a product’s safe operation, such as critical system updates. These conditions could be enforced by the European Commission under the auspices of the EU’s Network Code on Cybersecurity, which aims to establish ‘a European standard for the cybersecurity of cross-border electricity flows’. Access conditions could also be included in pre-qualification criteria for renewable energy auctions under the NZIA.
Invest in flexibility. A flexible electricity grid will be better equipped to smooth out imbalances in supply and demand. This should help to reduce the likelihood and severity of price spikes, and contribute to lower and more predictable electricity bills for households and businesses.
Energy storage, such as grid-scale battery storage, is central to ensuring flexibility in systems based on variable sources of renewable energy. An electricity system must balance supply and demand in real time, which means ensuring that energy storage, alongside transmission and interconnector capacity (see below), keeps pace with new solar and wind generating capacity. Otherwise, when supply is high and demand is low, renewable generation is curtailed, or electricity consumers are offered extremely low, or even negative, prices to take the surplus and maintain grid stability. Lags in storage additions and in the expansion of grid capacity led to electricity prices falling below zero for a record number of hours in 2025. Negative prices can benefit some consumers – such as those with home battery systems or on variable tariffs – and professional electricity traders, but this reduces the appeal of future private investment in renewables.
As the share of electricity generated from renewables in the EU grows, grid managers will need to be able to store energy for longer periods – days, weeks, months and even seasons.
As the share of electricity generated from renewables in the EU grows, grid managers will need to be able to store energy for longer periods – days, weeks, months and even seasons. Yet the average storage duration of battery projects in Europe was 2.5 hours in 2024. The EU should focus its industrial support on the development and deployment of viable long-duration energy storage solutions, such as flow batteries. National regulatory frameworks must also enable operators of energy storage assets to participate in ancillary services and capacity markets; this is not currently the case in all EU member states.
The supply-side flexibility provided by storage will need to be coupled with demand-side flexibility. This will involve the use of measures to shift consumption towards periods when electricity is abundant, thereby providing consumers with the same energy services while placing less pressure on capacity. This would contribute to the stability of the energy system and reduce costs.
One way to improve demand-side flexibility would be to expand the use of ‘smart metering’. Smart meters provide real-time price signals that incentivize households and industrial consumers to use electricity when it is cheapest (e.g. when renewable generation is highest) and to avoid using it when it is expensive (when there is little renewable generation). Smart meter adoption rates vary greatly across the EU. In Denmark and Italy, practically all households have smart meters, whereas in Germany and Czechia the rate of adoption is less than 5 per cent. A consequence of this is higher running costs for electric alternatives to fossil fuels, reducing the incentive for consumers to switch. One study found that German drivers switching from petrol vehicles to EVs can expect to save on average £970 (€1,106) a year, but that in Britain, where smart meter penetration is 70 per cent, drivers can expect to save over £1,500 (€1,710). The European Commission, in its Action Plan for Affordable Energy, has emphasized the need for member states to accelerate deployment of smart metering. Member states will also need to ensure that consumers are aware of the economic benefits of flexible energy consumption and have access to a range of dynamic pricing contracts.
Increase interconnection capacity. High-voltage cross-border cables, known as interconnectors, have a crucial role to play in the energy transition. By enabling surplus electricity to be traded between national grids, interconnectors facilitate grid balancing and flexibility, temper price volatility and reduce costs. They also allow countries to import electricity and avoid blackouts in times of crisis. Britain’s grid supplied France with 10 TWh of electricity in 2022 when half of France’s nuclear reactors were taken offline for scheduled maintenance and unscheduled repairs. Interconnectors helped Poland avoid major blackouts in 2020 and 2021. Interconnectors have also been an important part of European support for Ukraine amid the ongoing destruction of the latter’s energy infrastructure by Russia.
The European electricity system had interconnection capacity of 116 GW in 2024. Based on planned projects, this is expected to reach 167 GW by 2030. However, interconnection capacity will then need to almost double between 2030 and 2040, to 318 GW, to fully meet the anticipated needs of Europe’s growing electricity system. Electricity interconnectors are increasingly a target for sabotage, particularly in the Baltic Sea; security for this critical infrastructure should be prioritized. The European Commission’s Action Plan on Cable Security, published in February 2025, proposes a number of measures, including: an integrated surveillance mechanism to coordinate the efforts of affected member states and private operators; an air, surface and underwater drone surveillance programme; and enhanced operational cooperation with NATO in response to attacks.
The EU should also seek to maximize the energy security benefits of its interconnections with the UK. This must involve finalizing post-Brexit bilateral electricity trading arrangements, and resolving looming issues between the respective EU and UK carbon border adjustment mechanisms (CBAMs). Divergent treatment of electricity under the two schemes risks impeding growth in low-carbon energy flows and limiting the benefits for grid management and efficient energy trade. At the EU–UK summit in May 2025, the two sides agreed to pursue efforts to link their emissions trading systems (ETS’s), which would exempt each party from the other’s CBAM, as well as to explore possible UK participation in the EU’s internal electricity market. EU–UK negotiations on linking their ETS’s formally opened in the autumn of 2025, providing a tangible opportunity to make progress on this front.
Interconnectors can make a greater contribution to energy security if they are integrated with wind generation capacity to form ‘offshore hybrid assets’ (OHAs). OHAs enable clusters of offshore wind farms to be connected to the electricity grids of multiple countries, reducing the need for new infrastructure, facilitating more efficient electricity trading, and potentially enabling the creation of ‘energy islands’, where surplus electricity can be converted into green hydrogen. This approach is particularly promising in the North Sea, offering an opportunity for the EU and the UK to capitalize on the increased political will for cooperation on the energy transition.
![Figure 12. The EU’s gas supply risks, by supplier country [113]](https://www.chathamhouse.org/system/files/styles/reader_large/private/reader-content/publication-37787/file-63523/OEBPS/image/ESC-169-Infographic-260114.png?itok=2Y9QU4UP)