Europe is not on track for its 2030 interconnection targets: Could reform unlock the next wave of projects?

Interconnectors have become critical infrastructure for a renewables-led energy system, now serving not only to facilitate imports during periods of high demand but also to enable exports, reduce grid constraints and support system resilience — yet Europe is not on track to meet its 2030 interconnection targets, with cross-border electricity exchange capacity needing to reach 167 GW by 2030 and 318 GW by 2040, representing a substantial build-out challenge. 

For sponsors, lenders and developers, the hurdles extend beyond identifying capacity needs to structuring and financing projects in a shifting regulatory environment, with existing revenue models such as merchant and cap & floor presenting difficulties — particularly for complex or later-stage projects facing supply chain pressures, rising capex costs and the need to commit capital ahead of final approvals. 

In the meantime, regulatory reform is accelerating, with DESNZ and Ofgem consultations in the UK examining coordinated strategic planning and new competition models, and the RAB model gaining traction as an alternative given its ability to provide stable regulated revenues and, in some cases, construction-phase payments — improving bankability and lowering the cost of capital. 

For more information, see our client briefing: Europe is not on track for its 2030 interconnection targets. Could reform unlock the next wave of projects?