Grid investments are driving increased expenditures on infrastructure, influencing tariffs worldwide, IEA said in its report called Electricity 2025.
The primary cost factors include new transformers, power lines, and pylons, with significant expansion anticipated in both advanced and emerging economies to meet rising demand, modernize ageing systems, and enhance resilience. Digitalization and smart grid technologies are key aspects of modernization.
IEA analysis indicates that global transmission and distribution grids must grow by over 20 percent in length by 2030 to meet energy and climate goals. This requires an annual average grid investment increase to USD 600 billion from the current USD 300 billion. Digital and smart grid investments will also continue to rise.
Countries are accelerating grid infrastructure investments with varying priorities. Italy’s Terna and Enel are allocating 67 percent and 55 percent of their respective capital expenditures for 2024-2028 and 2025-2027 to asset development, upgrades, and new connections, with Terna investing over 10 percent in grid digitalization.
The Netherlands’ TenneT plans to raise its annual offshore infrastructure spending from under EUR 500 million in 2022 to over EUR 5 billion by 2026, while Liander is investing EUR 3.6 billion in overcoming grid bottlenecks and integrating electric vehicle and heat pump demand from 2024-2026.
Japan’s TEPCO is addressing rising demand from data centers and semiconductor manufacturers, targeting USD 3.2 billion in grid expenditures by 2027. National Grid UK is dedicating 20 percent of its 2027-2031 investment, GBP 6.6 billion, to improving grid resilience. South Australia Power Networks (SAPN) is prioritizing replacing and reinforcing existing infrastructure, allocating over 57 percent of its 2025-2030 budget to asset replacement and network augmentation.
Planned investments are expected to impact consumer bills and tariffs. Regulators play a critical role in determining cost recovery through tariffs. In the Netherlands, TenneT anticipates an average annual increase in transmission tariffs between 4.3 percent and 4.7 percent from 2025 to 2034, mainly driven by offshore grid expansion.
National Grid UK projects transmission cost components in electricity bills to rise from GBP 23 per year in 2026 to GBP 44 in 2031 for average households. However, these investments could generate GBP 12 billion in system cost savings, translating to an annual consumer savings of GBP 40, offsetting increased transmission costs. In South Australia, SAPN expects a slight decrease in bills, with monthly residential costs dropping from AUD 613 to AUD 570 and business costs decreasing from AUD 1,466 to AUD 1,362 between 2024 and 2025.
Baburajan Kizhakedath