Energy infrastructure investments have risen steadily since the invasion of Ukraine, but the world still faces a 50% shortfall by 2030.
The war in Iran – which escalated to close the Strait of Hormuz on 2 March – has triggered another energy security crisis, with oil and gas prices oscillating wildly in recent weeks.
Especially for European governments, this resembles a scenario already experienced in 2022, when the invasion of Ukraine revealed the EU bloc’s heavy reliance on Russian energy imports. In response, the European Commission set up its REPowerEU plan to wind down at speed Russian energy from EU markets.
“Russia’s invasion of Ukraine represented a fundamental shift in how governments understand energy security,” said Rana Adib, Executive Director at energy policy network REN21. “The crisis exposed the economic risks of fossil fuel dependence very clearly,” she added, noting that renewables deployment and increased grid investment have since helped reduce the need for fossil fuel imports.
Jonathan Bruegel, Power Sector Analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), echoed this view. “Grids are slightly better prepared operationally than before the Ukraine war, particularly due to improved system coordination and reduced reliance on Russian gas.”
Indeed, global grid investment reached US$483 billion in 2025, according to BloombergNEF’s (BNEF) annual Energy Transition Investment Trends report. This represents a growing investment appetite for grid infrastructure since 2022, when global grid investments stood at approximately US$274 billion.
Still, the International Energy Agency (IEA) has warned that – to maintain electricity security amid rising electricity use – grid investments need to reach parity with the amount spent on energy generation. At the moment, the IEA estimates that for the US$400 billion spent annually on grids worldwide, US$1 trillion is invested in generation assets.
Despite cooperation and multilateral agreements, such as COP29’s Global Energy Storage and Grids Pledge, annual grid investment needs to hit US$600 billion by 2030, if climate goals are to be met.
Grids – unlike renewables – have not faced pushback from anti-climate groups. “They have largely escaped the ESG backlash because they are no longer seen as ‘green assets’ but as core economic and security infrastructure,” said Maria Pastukhova, Programme Lead for Global Energy Transition at think tank E3G.
Queuing for a connection
While Western grids are better equipped than they were in 2022 to handle fossil-fuel price shocks, they are not yet fully equipped for the next phase of risk, according to Dave Jones, Chief Analyst at energy think tank Ember. “Grids remain exposed to congestion, slow connection queues, physical vulnerability and supply-chain bottlenecks for transformers and cables,” he noted.
This means installed energy capacity is waiting in interconnection queues to be deployed even though governments have enacted meaningful policies to streamline procedures, prioritise grid projects, and improve system flexibility through storage, demand response and smarter system operation, said Adib from REN21.
Pastukhova from E3G points out that faster paperwork has not yet translated into fast build-out. “Permitting reform reduces friction, but the real bottlenecks are now land access, local opposition, utility balance sheets and equipment shortages,” she said.
These issues also push up prices. It is estimated that the cost of improving and modernising grids already makes up around 20% of household bills in Europe.
Meanwhile for investors, conversion of capital into operational assets remains constrained, said Bruegel from IEEFA. “Grid projects in Europe still commonly take seven-to-ten years to move from planning to commissioning,” he added, noting that permitting delays, judicial appeals, supply chain fragility and workforce shortages form a bigger hurdle to deployment than access to financing.
“Many developers face multi-year delays, rising costs, and in some cases are forced to drop projects altogether,” commented Adib from REN21. She suggests stronger coordination is needed between utilities, regulators, governments and manufacturers to speed up projects and further expand investment opportunities.
Network benefits
The challenges of unpredictable supply and demand pressures against a backdrop of accelerating climate risks are leading to diverse policy approaches globally.
While several jurisdictions have introduced restrictions on new data centre infrastructure to better manage energy security in the age of AI, numerous developing countries have doubled down on rooftop solar to make up for poor grid performance.
“Distributed solar is becoming a major decentralised force, especially where grids are unreliable, diesel is expensive, and households or businesses need resilience,” said Jones from Ember. The main benefit is that rooftop solar can work around weak grids for part of the day, reduce diesel use, and relieve pressure on distribution networks, especially when paired with batteries, he adds.
Pastukhova from E3G said this development is particularly notable in Pakistan and Bangladesh, where rooftop solar is scaling rapidly as a response to expensive and unreliable grid power; in Nigeria and Kenya, where solar-plus-storage is displacing diesel generators; and in India and South Africa, where commercial and industrial users are turning to rooftop PV to hedge against outages and rising tariffs.
However, all experts agree that decentralised solutions, such as rooftop panels, are no substitute for grids.
“It complements rather than replaces the need for stronger electricity networks,” said Ember’s Jones.
While rooftop solar can reduce pressure on networks and displace more expensive and polluting generation sources, such as diesel, it does not eliminate the need for grid investment, seconded IEEFA’s Bruegel. “Industrial demand, urbanisation and system balancing requirements still depend on robust transmission and distribution infrastructure.”
Adib from REN21 advocated for a transformation towards a more flexible, two-way system where decentralised and centralised solutions evolve together. “Distributed renewables can relieve pressure on grids and expand access, while modern grids enable scale, stability and integration across sectors.”
The IEA estimates that about two-thirds of existing grids worldwide will need to be replaced by 2050, given most components have an average lifetime of 40 years. This highlights how continuous grid investments will be crucial in delivering the energy transition.
Alongside infrastructure investment, governments also need to focus on regional manufacturing capacity, skills development, and the strengthening of logistics and transport systems. “The energy transition depends not only on deploying infrastructure, but on building the industrial ecosystem that enables it,” said Adib.
