A joined-up electricity network was a dream – along with the customs union and a common market for coal and steel – of the architects of European union. Policymakers have spent decades attempting to create a grid system. But it is only recently that the quality of the network has become the focus of attention.

The current grid system is widely seen as outdated and unfit for a low-carbon age. Today’s grids were built for a world dominated by large plants powered by coal, gas or nuclear energy. Now that electricity is increasingly to be generated in remote places, such as offshore wind farms or solar panels on Europe’s southern fringes, the system is no longer adequate. In addition, the assumptions that it was based on, that people are passive recipients of electricity, are now outdated.

Consumers are also becoming producers, generating their own power with rooftop windmills and solar panels, and they are more interested in varying their energy use so that they benefit from cheaper off-peak prices as consumers and from higher prices as producers.

Ushering in this new approach to grids depends partly on the introduction of an array of smart technologies. ‘Smart grid’ technologies include sensors to detect and repair power outages, flexible transmissions systems that connect dispersed power systems, and smart meters that allow households to measure their consumption and to feed energy back to the grid at the most profitable time.

The European Commission has been an early champion of smart grids. It believes that they are essential if Europe is to meet a target of generating 20% of its energy from renewable sources by 2020 and move to a zero-emissions power system by 2050. The Commission also hopes that smart grids will reduce outages – such as the power cut of 2006 that left 10 million people in the dark from the Netherlands to Italy.

US investment

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Companies see huge potential in smart grids. Siemens, the German engineering and electronics giant, is chasing a 20% share of the €30 billion smart-grids market by 2014. So far, the company has enjoyed above-average growth rates in this market.

“The US market is important, the EU27 is a huge market. China will be huge,” says Ralf Christian, chief executive of Siemens’ power distribution division.

But although the EU has been an early mover, it is the US that is now pouring in the money. Earlier this year President Barack Obama set aside $3.4bn (€2.29bn) for smart grids in his economic stimulus package. This money will pay for 18 million smart meters, and 200,000 smart transformers that will allow companies to replace units before they fail. Meanwhile, private companies have said that they will put in $4.7bn (€3.1bn).

The Commission estimates that the EU must spend €2bn over the next ten years to update the European grid. But analysts see many obstacles and gaps.

The EU’s smart-grids pilot projects are “very limited in scope and size”, says Christoph Bals, political director at Germanwatch, a lobby group for sustainable development. Germanwatch is a founder member of the Renewables Grid Initiative, a consortium of researchers, campaigners and companies that argues that regulations must be changed to create continent-wide incentives for investment, in place of the current patchwork of national rules.

The EU lacks “a stable long-term regulatory framework”, says Bals. He believes that the existing rules do not address how to finance cross-border connections, overcome planning delays or give renewable energy priority access to the grid. For example, if the UK and Norway harmonised their national rules, a stalled proposal for a North Sea interconnector could be revived.

The Commission understands the urgency, says Christian at Siemens, but the ideas still need to win support in member states.

“We have to be careful that good ideas are implemented fast,” he says, “China and the US may be able to overtake us in the future.”