Money on the line: scaling electricity interconnection for Europe’s energy future

Advancing interconnection deployment is essential to meet EU goals

The EU is not on track for its 2030 interconnection targets, and the European power system needs more cross-border projects to reach its peak efficiency by 2040. The European Grids Package and the next Connecting Europe Facility for Energy (CEF-E) should be leveraged to support this effort.

Interconnection infrastructure could minimize electricity system costs if expanded enough. However, the scale of expansion needed far exceeds current plans – both in major demand centers and in more isolated regions such as the Nordics and Eastern Europe. To make it happen, public funds need to be effectively guided and extensively allocated.

This EU policy cycle should concretise priorities for interconnection

Strengthening European interconnection is central to the EU’s security and energy agenda. However, with 11 countries – representing nearly 80% of EU power generation – set to fall short of the EU 2030 interconnection target, effective policy and financial tools are essential to accelerate delivery.

Power grids have moved from the technical fringes into the political spotlight over the past three years – reflecting growing recognition of their integral role in the energy transition and in response to the tangible consequences of grid constraints. Strong policy actions have been taken on grids – with the Grid Action Plan, revision of the Electricity Market design and guidance on anticipatory investments as recent examples. 

It is expected that interconnection will receive renewed attention under the 2024-2029 political cycle of the EU Commission. On the policy side, strengthening European cross-border connectivity is among the key objectives of the Grids Package. On the financing front, the proposed EU 2028-2034 budget presented by the Commission in July 2025 includes a fourfold increase in funding for cross-border energy projects, emphasizing the link between connectivity and energy security. 

Following the Iberian blackout event in April 2025, the security benefits of cross-border power lines have never been clearer – interconnectors were used to blackstart the power grid. This adds to the long list of advantages, from integration of renewables to cost-effectiveness and resilience. 

Yet, despite the latest political developments and the clear benefits they bring, interconnectors are not being deployed at the required pace.

Countries representing nearly 80% of EU power generation are behind on their 2030 interconnection targets

The EU interconnection target provides a metric to assess the level of connectivity between Member States. It is calculated as the ratio between the country’s electricity import capacity from its EU neighbors and its installed generation capacity. The political target of 15% by 2030, up from 10% by 2020, means countries need to increase their cross-border capacities as they expand their generation fleet.

The countries that would benefit most from interconnection are also those expected to have some of the lowest scores by 2030. Interconnection remains low in the isolated Iberian system, with Spain and Portugal reaching just 4.3% and 10% respectively. This prevents them from fully utilising their abundant renewable resources or benefiting from the enhanced grid resilience offered by strengthened links with continental Europe. 

Greece illustrates both the opportunities and challenges of the EU interconnection target. Its EU import capacity is expected to double in the next five years, adding 1.5 GW through links to Cyprus and Bulgaria. However, this will only increase its interconnection share from 6% to 9%, as the country is also expected to add 10 GW of domestic wind and solar capacity during the same period. That being said, when connections to non-EU neighbors are included – in particular the 3 GW interconnection project with Egypt – Greece’s interconnection level would surpass 22%.

Major demand centres heavily dependent on fossil fuels – Poland, Italy and Germany – are projected to stay below 10% interconnection by 2030, limiting their access to cleaner and cheaper imports.

While it is true that larger systems find it harder to increase their interconnection share due to their already large generation fleets, this gap sometimes reflects a lack of investment in new grid connections. Italy is the starkest case, set to reach only 4% interconnection by 2030 while expanding its import capacity by just 1.2 GW. Even when including connections with non-EU neighbors (Switzerland, Montenegro, Tunisia), Italy’s interconnection level is expected to remain below 8% by 2030.

16 countries are on track to reach or exceed 15% by 2030

By the end of 2024, 14 EU Member States had already met or surpassed their 2030 interconnection target. Of these, only Finland will see a negative change by 2030, falling back under the 15% benchmark. Additionally, due to expansion projects around Cyprus, Belgium and Sweden, a total of 16 countries are on track to meet or even exceed the target by 2030. The Crete-Cyprus interconnector, launched in 2022, will connect the last fully isolated EU Member State to the European grid.

Many of these highly interconnected countries do not necessarily use the power passing through their borders themselves. Instead, they serve as important transit corridors for electricity flows between their neighbours. For instance, Hungary acts as a hub between Central and Southeastern Europe, while Denmark serves as a bridge between the Nordics and continental Europe – particularly Germany.

The Baltic states also show high levels of interconnectivity, ranging from 40% to 60% in 2025. This stems from major projects commissioned as part of the synchronisation of the Baltics into the EU’s electricity grid, a process that was expedited in 2022 for security reasons.

Now is the time to shape Europe’s interconnectors for 2040

Strengthening interconnection is much more than just a compliance requirement – it is a critical factor of cost-effectiveness. Interconnectors are among the most effective tools to enhance reliability and unlock grid flexibility, bringing significant financial benefits to the system. It is estimated that by 2040, every euro invested in expanding cross-border transmission capacity will reduce generation costs by more than two euros.

The average lead time for an interconnection project in Europe exceeds 10 years, which means decision-makers must already be planning for 2040 rather than 2030. This is precisely where the pan-European assessment of grid needs comes in. Referred to as the Ten-Year Network Development Plan (TYNDP), this planning exercise identifies where building interconnectors can best support the evolving European energy system. 

Interconnection capacity must nearly double between 2030 and 2040

Analysis of TYNDP data projects an optimal total interconnection capacity of 318 GW by 2040. Europe is expected to reach 167 GW of cross-border electricity exchange capacity by 2030 (up from 116 GW in 2024). This means that fully meeting the anticipated power system needs will require adding 151 GW during the 2030s – almost doubling the infrastructure capacity throughout the decade.

While many cross-border lines are in development, most remain in early stages. From the 2030 “Reference Grid”, there are various steps to reach an optimal 2040 state. This begins with 34 GW of projects expected to come online by the start of the decade, but their construction is not yet certain enough to be included in official development plans.

The remaining potential expansion consists of just over 1 GW in permitting, 15 GW in planning and 46 GW under consideration – the latter two representing the most preliminary phases of interconnector realisation. To achieve 318 GW by 2040, approximately 55 GW of projects are still yet to be proposed.

This implies that action over the next few years must focus on two main areas. First, political and financial support is needed to accelerate ongoing projects. Second, conditions should be created to encourage new projects. These efforts will help close the remaining 55 GW gap.

Complementing the next CEF-E with other funding sources will determine the success of interconnection expansion in the 2030s

Faster interconnection expansion in Europe requires efficient allocation of financial resources, as these capital-intensive projects are typically reliant on EU funding. Such funds should both support existing projects that are strategic but still in their early stages, and create opportunities for new projects to be proposed to meet system needs. The EU Multiannual Financial Framework (MFF) for 2028-2034 will be critical to accelerate progress in these two areas.

EU funds are critical for European power grids

A capital-intensive project like the realisation of a new electricity interconnector often requires financial support from EU institutions. This typically takes the form of grants from the Connecting Europe Facility for Energy (CEF-E), possibly complemented by long-maturity loans from the European Investment Bank (EIB) or the European Bank for Reconstruction and Development (EBRD). The Biscay Gulf interconnector, a €3.1 billion project between France and Spain awarded €0.6 billion by CEF-E in 2017, also received a €1.6 billion loan from the EIB. This and other case studies, such as for the ELMED interconnector, demonstrate the potential of blending approaches in first reducing the upfront capital expenditure, and then supplying the long-term loan for a cross-border transmission project.

The CEF-E covers all forms of major energy infrastructure, from electricity interconnectors to pipelines for transporting and storing hydrogen, carbon dioxide and methane. Since its launch in 2014, the programme has provided almost €5 billion for a total of 77 studies and works related to electricity projects, accounting for more than 57% of the total budget.

A recent example is the Aurora Line, which is coming online in the next few months to enhance the Net Transfer Capacity between Finland and Sweden by at least 800 MW, which got awarded over €131 million for the study and construction phases – more than 48% of its construction capital expenditure (CAPEX) .

On average, a cross-border transmission line financed by the CEF-E is estimated to have around 31.5% of its total investment cost covered by the programme. This shows the key role of grant-based funds like Connecting Europe Facility in the context of the development of the European electrical system.

The missing €30 billion for electricity interconnection should be covered by alternative funding

Based on historical funding and progress of monitored candidates, a cross-border Project of Common Interest (PCI) or Project of Mutual Interest (PMI) takes on average a little more than 6 years to be commissioned after it is granted funds from the CEF-E. Among all MFF cycles, the upcoming one will be particularly decisive in funding an optimised European power system by 2040. However, due to the magnitude of the expansion needed, it would be unrealistic to expect the Connecting Europe Facility to cover more than 30% of the investment in electricity interconnections during the 2030s.

The 151 GW increase in interconnection capacity needed between 2030 and 2040 will cost at least €150 billion to build, based on data from TYNDP 2024. Applying the co-financing rate in place since 2014 means that electricity interconnection projects in Europe would require around €47 billion in grants from the next CEF-E.

The current proposal for the next CEF-E, while an impressive step forward compared to previous cycles, would mean around €17 billion in grants for electricity interconnection – 57.5% of the total budget, same proportion as during the 2021-2027 period – which does not seem sufficient to provide the necessary financial support to all projects to come online in Europe during the 2030s.

In fact, it means €30 billion in grant funding is missing to close the interconnection expansion gap. However, there are still options to leverage this increased EU budget towards a sufficiently robust electricity interconnection infrastructure by 2040.

The first scenario would involve a push from EU loans, covering half of the €150 billion total CAPEX for interconnectors starting operations in the 2030s. The European Investment Bank, which alone can lend up to 50% of the economic value of an infrastructure project, would act in combination with other EU banks to ensure favorable terms for €75 billion of borrowed funds.

The second scenario counts on the market implications of a sub-optimal European power grid. Merchant lines such as the BritNed and the Eleclink, connecting the United Kingdom to the Netherlands and France respectively, demonstrate the success of interconnectors recovering their costs purely through congestion rent – the power price difference between two market zones – rather than through regulated returns. 

While the quota of the Connecting Europe Facility reserved for cross-border power transmission would cover around 12% of the total in the first two scenarios, the third, most extreme scenario would see up to €30 billion – 20% of the cumulative CAPEX – being granted to cross-border electricity networks through the reservation of the upcoming CEF-E budget purely for them. This would remove part of the burden from other EU institutions, but at the same time, create a new need for public funding of infrastructure for other energy carriers – hydrogen, carbon dioxide and methane, which historically have received 42.5% of the grants from the programme.

These three scenarios, which in no way aim for a perfect foresight of what the future structure of investment in European interconnections might be, show the range of possible paths that the EU policy can solidify on.

Supporting materials

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Methodology

Interconnection capacity data is sourced from Ember’s Europe Electricity Interconnection Data Tool or its references. Please consult the dedicated methodology for more information about the underlying assumptions and references.

The Infrastructure Gaps Report is an output of the Ten-Years Development Plan 2024 by ENTSO-E and ENTSO-G, presenting the findings of the “System Needs” study. The term “System Needs” refers to the identified differences between the currently expected and required transmission (and storage) infrastructure to support European decarbonisation targets up to 2050. The analysis is performed through various power system modelling iterations, which optimise the expansion of interconnectors (and utility-scale storage) in order to minimise total system costs. The scope and granularity of the original study are different, and often more complex, than the ones adopted for this report, which might lead to differences in presented figures, especially if aggregated. Please consult the original TYNDP 2024 publication for more information about the underlying methodology.

CAPEX and status data for existing electricity interconnection projects have been extracted from the TYNDP 2024 Projects Sheets portfolio. Projects not crossing borders according to the mapping defined in the Europe Electricity Interconnection Data Tool have not been included.

For interconnection projects not yet existing, but needed to reach “System Needs” capacity by 2040, the investment costs have been estimated by border, starting from CAPEX and Net Transfer Capacity (NTC) inputs for expansion candidates in the Infrastructure Gaps Report. Whenever more options were possible for a single border (due to higher geographical granularity in the original model), the minimum value among the available ones was picked, leading to overall conservative CAPEX estimates for this particular category.

Acknowledgements

Contributors: Paweł Czyżak, Izabela Urbańska, Reynaldo Dizon, Claire Kaelin

Image credit: Maksim Safaniuk / iStock Getty Images Plus