An Economic Approach to Fixing European Grid Connection Queues

Moritz Böttcher
16 September 2026 | Issue No. 196

Moritz Böttcher is a 2026 graduate of CIFE's Master of Global Energy Transition and Governance and holds a B.Sc. in Industrial Engineering from the University of Bremen (2025).

Context and Importance

As a whole, the energy transition follows a relatively simple formula: Replace fossil power in the electricity mix with renewables and electrify sectors that have previously relied directly on fossil fuels. In the recent past, the EU has made solid progress on the first front, with the share of wind and solar power alone reaching 30% in 2025 and outpacing fossil power for the first time [1]. At the same time, the share of electricity in total final energy consumption (TFEC) has remained stagnant at around 23% for years, pushing the EU off track for the 35% aimed for by 2030 [2]. Put simply, the EU is successfully decarbonising electricity generation but failing to expand the role of electricity across the wider economy. This misalignment proves that the EU’s energy transition has reached a critical juncture where the primary bottleneck is no longer technology or renewable capacity, but infrastructure. Our transmission and distribution networks, originally designed for centralised, predictable generation, are now overwhelmed by the volume of decentralised connection requests coming from renewable generation and storage projects. Coupled with the volatility associated with wind and PV, this shift has transformed grid capacity into a scarce resource and exposed two critical economic failures in the process of connecting projects to the grid:  

1. Inefficient Resource Allocation

Many European grid operators still allocate capacity on a First-Come, First-Served (FCFS) basis, connecting projects chronologically based on the time of application. This approach treats grid access as a "free good” rather than a scarce resource. By relying on a simple waiting list, commonly described as the grid connection queue, this system fails to distinguish between high-value, ready-to-build projects and those that are merely speculative [3]. Consequently, grid capacity is not allocated to projects that offer the greatest benefit to the energy system, but simply to those that entered the queue earliest, leading to economic and societal losses.

2. Negative Investment Externalities

From a developer’s standpoint, the grid connection queue represents a significant investment risk, as possible multi-year delays threaten the economic viability of projects. To hedge against this uncertainty, developers frequently submit multiple applications for a single project at various locations. This creates a vicious cycle: as the queue fills with these so-called ghost projects, the waiting time for legitimate projects increases, forcing even more speculative applications. As of June 2026, at least 375 GW of renewables and 455 GW of battery storage projects, representing a capital value of more than €100 billion, were stalled in European grid connection queues [4]. If this financial risk persists, developers could move to other markets with better planning certainty, resulting in negative chain effects for the EU’s clean energy industry.

The Commission has started to recognise and address the problem, with grid access being a main focus of the European Grids Package, currently entering inter-institutional trilogue negotiations [5]. If approved by the Parliament and Council, the policies included will incentivise grid operators to shift to a First-Ready, First-Served (FRFS) model, assessing project progress and the meeting of key milestones before allocating grid capacity. Furthermore, the Package attempts to accelerate physical grid expansion by introducing reforms in the process and designating the power grid as having an “Overriding Public Interest” in order to simplify administrative approvals. However, while FRFS addresses the issue of ghost projects and legal mechanisms speed up infrastructure planning, they fall short of resolving the underlying economic problems: the lack of price signals for grid scarcity and the structural financing gaps holding back infrastructure supply.

Grid Demand - Reorganising the Queue

Addressing the bottleneck of grid connection requires the reorganisation of the queue itself, which, as outlined previously, currently lacks economic efficiency. The Commission’s proposal to shift from "FCFS" to "FRFS" essentially acts as a maturity filter which will effectively eliminate ghost projects. However, it remains a purely administrative tool that does not introduce the price signals and mechanisms required for truly efficient resource allocation. Market-based alternatives include:

Capacity Auctions: Instead of forming administrative queues, connection rights are auctioned in areas with limited capacity. This mechanism uses a competitive bidding process to reveal the true value of grid access, ensuring that the most economically viable projects connect first. At the same time, by capturing the auction premium as a "scarcity rent", grid operators secure localised, private capital that can be directly reinvested into reinforcing the grid.

Non-Refundable Commitment Fees: Developers must pay a significant deposit to enter the queue, which is only refunded upon reaching specific construction milestones. This discourages ghost projects by introducing a direct financial cost to speculative behaviour, ensuring only serious capital remains in the queue.

A critical shortcoming of these market-based solutions is that, while effective in deterring speculative over-reservation, they naturally favour large-scale developers with significant financial backing. This risks leading to market concentration and excluding smaller and community-based developers, who have already identified grid access as a significant barrier to development in the EU [6]. Consequently, when dealing with grid connection, a strong price signal should always be complemented with recognising the societal value of projects. In practice, regulators can protect market diversity by exempting smaller installations from bidding or by withholding a percentage of available grid capacity specifically for citizen-led initiatives. By integrating non-financial award criteria such as local ownership, community benefits, or energy poverty mitigation, policymakers can effectively balance pure economic efficiency with social equity.

Grid Supply - Accelerating Infrastructure Build-Out

Secondly, beyond organising demand, it is imperative to expand the physical infrastructure of the grid, thereby increasing supply.  On this matter, the European Grids Package introduces a Permitting Directive and an Environmental Omnibus intended to simplify administrative approvals. A central feature is the designation of electricity grids as having “Overriding Public Interest", a legal status meant to accelerate the implementation of infrastructure projects. However, the focus remains largely on administrative planning rather than addressing the structural supply-side bottlenecks, such as financing gaps and supply chain constraints. Policy options that offer a more holistic solution include: 

Maximising Marginal Capacity through Repowering: The most cost-effective way to increase supply is to upgrade existing assets rather than building new ones. By extending Environmental Impact Assessment (EIA) exemptions to all modernisation and repowering projects, including those built before modern regulations, the EU can maximise the marginal capacity of existing infrastructure and avoid the social resistance associated with starting new projects from scratch.

Lowering Regulatory Risk: The Package relies heavily on "delegated acts" for core governance rules (,) which are easy to reverse once political strategy shifts. This creates regulatory uncertainty, as these acts can be modified by the Commission without a full legislative vote. Shifting essential methodological and governance rules into basic legislative acts provides the long-term stability needed to attract the €1.2 trillion in private capital required for infrastructure expansion [7].

A significant shortcoming of these supply-side measures is the inherent trade-off between speed and environmental safeguards. Critics and environmental advocates warn that bypassing established assessments without robust impact data may lead to poorly planned projects, increased legal uncertainty, and higher long-term costs associated with ecosystem decline [8]. Furthermore, while anchoring technical rules in basic legislative acts increases stability, it risks creating institutional inflexibility. In a fast-evolving energy sector, the full legislative process may be too slow to adapt to technical shifts, whereas delegated acts allow the Commission the flexibility to update methodologies as circumstances change.

Policy Recommendations

The evaluation of the current policy landscape reveals that while the European Grids Package’s administrative reforms provide a necessary starting point, they are insufficient to resolve the economic inefficiencies within our power grids. To resolve the gridlock, the EU must move beyond these measures and implement more robust grid policies focusing on the identified priority areas: more efficient resource allocation and accelerated infrastructure deployment.

1.    Implementing a more efficient and equitable Grid Connection Model

To resolve the inefficiency of the current queue without excluding smaller market participants, the EU should transition to a tiered auction-based framework combined with a societal value weighting. For large-scale projects exceeding a specific capacity threshold, the Commission should mandate capacity auctions. This mechanism reveals the true economic value of grid access and captures "scarcity rents" that can be reinvested into network expansion. Romania, where grid connection is auctioned off on a yearly basis for new production sites equal to or above 5 MW, serves as a best-practice example [9]. By applying auctions only to larger developments, community-based projects remain protected from high bidding costs, preserving market diversity. For these lower-scale connection requests, the EU should stick to replacing the FCFS approach by FRFS, as proposed in the European Grids Package [5]. Furthermore, as already practiced in the Netherlands, national regulators should incorporate societal value criteria into the auction mechanism [10]. This ensures that projects contributing to essential public services or local grid stability can be prioritised even if they lack the financial capital of larger industrial incumbents, effectively balancing market efficiency with social equity.

2.    Regulatory Stability and Supply Management to close the Investment Gap

To address physical scarcity while respecting environmental safeguards and maintaining institutional agility, the EU should move from administrative labels for infrastructure expansion toward targeted implementation and investment support while ensuring regulatory certainty. First, to attract the €1.2 trillion in private capital required for grid expansion, policymakers must reduce the regulatory risk by anchoring core governance and methodology rules in basic legislative acts. To avoid institutional inflexibility, a balanced approach should leave specific technical modelling to expert bodies, including transmission and distribution grid operators, allowing the system to adapt to fast-evolving realities without a full legislative process. In addition, the EU must maximise capacity through streamlined repowering and modernisation. By extending environmental exemptions to all upgrades of existing lines, the EU can rapidly increase supply while avoiding the social resistance and long delays associated with new corridors. Crucially, to mitigate the trade-off between speed and environmental protection, the Commission must ensure that any exemptions from established assessments are backed by robust ecological impact data, specific mechanisms for which are already proposed by industry experts [7]. This data-driven approach ensures that accelerated permitting does not compromise environmental safeguards and lead to poorly planned projects or damage to ecosystems.

The European power grid has transformed into the most critical bottleneck of the energy transition, exposing a severe investment gap. Continuing to manage the scarcity of grid connection through outdated administrative queues and fragmented planning will only further exacerbate the situation. By implementing the targeted reforms proposed in this policy brief, the EU can correct the economic failures currently complicating both the allocation of grid capacity and the infrastructure build-out. Aligning clear market signals with physical network expansion will ensure that the grid serves as a driver, rather than a barrier, to Europe’s long-term climate, industrial, and security objectives.

References

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² Ibid  1
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²⁶ Ibid note 26
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