From Ambition to Agreement: How the EU Grids Package Can Succeed
The package will not move until Member States agree on how grid costs are shared, congestion income allocated, and planning authority distributed.
This European Macro Policy Network (EMPN) policy brief is authored by Mediha Inan, Asker Voldsgaard and Janek Steitz, with contributions from EMPN members Arena Idé, Institut Avant-Garde, Instituut voor Publieke Economie , and The Finnish Centre for New Economic Analysis.
Executive Summary
Europe’s grid infrastructure deficit has become a strategic liability. A strong and interconnected European energy system is the most cost-effective way to scale the continent’s renewable and electrification share, thereby reducing fossil imports and lowering energy prices. Yet almost half of the EU’s cross-border electricity capacity needs for 2030 remain unaddressed.
The EU Grids Package is the Commission’s bid to unblock grid investment. Launched in December 2025, the package aims to fast-track permitting, shift infrastructure planning towards EU-level steering, mandate cross-border cost allocation proportional to benefits, and require TSOs to earmark 25% of congestion income for EU cross-border projects – a provision that effectively redirects often domestically generated revenues towards cross-border infrastructure.
Member States broadly agree on direction, but disagreement persists. While the strategic case for grid expansion commands broad support, disagreements over infrastructure planning, congestion income, and cost-sharing reflect four structurally divergent national coalitions. Transit countries (e.g., France and Austria) bear domestic grid costs from cross-border flows and want compensation. Mid-to-high-price importers (e.g., Germany and Poland) expect cheaper electricity imports. Low-to mid-price exporters (e.g., Sweden and Finland) fear higher prices through enhanced interconnection. Low-to-mid-price importers (e.g., Denmark and Belgium) support integration, with some anticipating a shift towards net exporter status.
Compromise is within reach but requires concessions on all sides. The Cypriot Presidency compromise moves in the right direction but falls short of the deeper distributional concerns driving opposition. Five targeted measures, addressing Member States’ red lines and creating room for compromise, could unlock the deal.
Key Recommendations
Increase the process legitimacy of the central scenario. The central scenario should remain a delegated act, but built through a transparent, co-developed process with mandatory sensitivity analysis. Gap-filling tenders by the Commission should only apply where Member States have already agreed in principle but delivery is stalled by maturity or financing constraints.
Carve out domestic congestion income. Mandatory earmarking should apply only to cross-border congestion income, with limited international use of the funds only where a Cross-Border Cost Allocation (CBCA) demonstrates significant benefit to the country in question. Member States meeting the EU’s interconnection target should retain full discretion. This also avoids creating a disincentive against bidding zone reform, which the proposed rule risks introducing.
Extend cost-sharing to transit-driven domestic grid reinforcements. Domestic grid costs linked to cross-border flows should be eligible for CBCA via a dedicated assessment mechanism. Amortisation vehicles and guidance on tax mechanisms can improve distributional outcomes.
Calibrate permitting without weakening safeguards. Tacit approval should apply only where national law allows. Cross-border project timelines should be aligned across Member States.
Deploy public financing first and target it better. Extend the scope of CEF-E funding to transit-driven domestic reinforcements and target the funding towards projects with asymmetric cost-benefit profiles among participants, bundled projects, and projects with large spillovers to third party countries. Mobilise EIB and national development banks before defaulting to costlier private arrangements.