Europe’s grid bottleneck is a crisis for renewables – but a goldmine for tech startups

The rollout of renewables is outpacing investment in the grid. That's both a big problem and a big opportunity, depending on which way you slice it.

Let's begin with the problem.

Almost half (47%) of Europe’s electricity came from renewable energy in 2024. Yet the power grid designed to transport that energy is now so congested – and underinvested – that it threatens to slow the entire clean energy transition. That's according to a new report by Berlin-based Aurora Energy Research.

Energy traffic jams

Europe spent €8.9 billion in 2024 just to deal with overloaded electricity lines – about 13% of what it invests in the grid each year. At the same time, it had to throw away 72 TWh (terawatt hours) of mostly renewable power because the grid couldn’t handle it. That’s about as much electricity as Austria uses in a year.

Meanwhile, over 800 GW of solar and wind and 550 GW of battery projects across Europe are currently sitting idle waiting to be connected to the grid – essentially creating a electricity traffic jam.

“European power grids require significantly more investment in expansion and smarter utilisation to meet net zero targets,” warns Frederik Beelitz, Aurora’s head of advisory for Central Europe.

Investment is rising, but still falls short

While grid spending has increased 47% over five years to around €70 billion annually, the report finds this is still 15–44% below what’s needed each year to stay aligned with net zero pathways.

By 2050, Europe will need 576,000 km of transmission lines, 7.8 million km of distribution lines, and over 5 million transformers – essentially a full rebuild within a single generation.

“As Europe continues to electrify… we must pay due attention to the capacity and complexity challenges,” says Gerhard Salge, CTO at Hitachi Energy. “The technologies are available, we now need to deploy them at speed and scale.”

Need for grid tech

This signals both a risk for energy investors but also a promising opportunity to back startups developing optimisation, flexibility, and grid-efficiency tech.

Jan Lozek, founder and managing partner at Future Energy Ventures (which recently raised a €235m fund), told Impact Loop that the firm is actively looking to invest in grid optimisation solutions.

Startups working in this space include Sweden's Rebase Energy, which using climate forecasting tools to predict times of peak energy production, and Netherlands-based Sympower, which uses so-called demand response software to balance the grid during peak usage.

However, while there are a number of early-stage companies in this space, Lozek believes the opportunity "far exceeds the current supply."