European distribution grid investment rose 51% between 2021 and 2024, reaching €35.3 billion ($41.6 billion) per year, and is projected to climb a further 32% to €46.7 billion by 2027, according to a newly published ACER report.

The figures, drawn from 191 large distribution system operators across 25 EU member states and Norway – excluding Bulgaria and Denmark – reflect the scale of infrastructure spending now underway across the bloc. But ACER warned the investment ramp risks being weakened by fragmented planning obligations, persistent capital expenditure bias, uneven digitalization, and a structural imbalance that leaves smaller operators outside key regulatory requirements.

Almost two-thirds of EU distribution system operators (DSOs) are currently exempt from preparing a network development plan, the report found, meaning at least 5% of EU customers are served by operators exempt from preparing such plans. Annex data indicate the share of customers affected ranges from negligible in some member states to around 25% in Germany.

The DSO landscape itself further complicates the problem. While 92% of European DSOs are small operators – defined as those serving fewer than 100,000 customers or operating small isolated systems – they collectively serve only around 8% of the customer base. Many of the regulatory obligations ACER considers essential for the energy transition apply only to large DSOs, leaving a structurally disadvantaged tier outside key requirements.

ACER also noted uneven progress on digitalization. Smart meter rollout exceeds 80% in most EU member states but remains below 30% in six, limiting DSOs’ ability to integrate flexibility resources, monitor grid utilization, and plan accurately for future demand.

Capital expenditure bias remains a further concern. Remuneration structures in several countries favor physical grid build-out over flexibility and demand response alternatives. Some countries have introduced corrective measures, but ACER said the bias remains widespread.

ACER groups its 10 recommendations under three pillars. For competences, it calls for stronger mandates for national regulatory authorities, better‑resourced regulators and DSOs, the removal of barriers to DSO mergers where consolidation would improve service quality, and the expansion of network planning to national or subnational level.

For transparency, ACER recommends requiring DSOs to publish five‑year capital and operational expenditure trajectories and to monitor and report on grid utilization. For efficient investment, it calls for the elimination of rigid expenditure caps, the use of forward‑looking remuneration based partly on planned expenditure with ex‑post reconciliation, and measures to reduce capital expenditure bias, including total‑expenditure benchmarking and output‑based incentives.

Grid connection constraints have become a growing concern for solar and storage developers across Europe. In the United Kingdom, grid connection applications increased 460% between January and June 2025, according to the UK government.

Earlier this month, RWE cited grid connection availability when it abandoned a 99.9 MW solar and battery storage project in Wrexham, Wales, after reaching the formal consultation stage. ACER’s report does not address connection queues directly, but its findings describe structural conditions that industry groups have also linked to delays.

ACER is also examining broader electricity market structures. The regulator recently opened a public consultation on the European power purchase agreement (PPA) market, seeking input on regulatory conditions, financing barriers, and market access across member states. The findings will inform future policy measures and contribute to ACER’s ongoing assessment of structural inefficiencies in Europe’s power markets.

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