Countries scale back EU plans to fund cross-country energy grids

By Kate Abnett

LUXEMBOURG, June 26 (Reuters) - Governments cut back EU plans to spend national funds on cross-country energy infrastructure projects on Friday, but agreed to more centralised planning of power network expansion to absorb more renewable energy and cope with demand from data centres.

Europe's ageing electricity grids require hundreds of billions of euros in upgrades to meet rising needs from electric vehicles and data centres and to absorb and store the fast-growing supply of renewable energy.

The European Union proposals aimed to raise funds for this but met pushback from countries including Sweden, which stood to lose billions of euros in revenue and had threatened to restrict power exports to neighbouring countries if the law went ahead.

Instead of using 25% of the unspent "congestion revenue" grid operators collect on power trading to fund EU-backed energy infrastructure, as the European Commission had proposed, countries' energy ministers decided that national operators would not ​hand over any revenue from domestic power trade.

Instead, countries would earmark for EU-backed projects 10% of the unspent congestion income from cross-border power trades from 2028, with that share rising to 25% by 2031.

"It's a major win," said Ebba Busch, the energy minister for Sweden, where operators collected ​30.5 billion Swedish crowns ($3.1 billion) in grid congestion revenues last year.

The changes raise questions about where ​cash for new grid projects will be found.

Gaps in Europe's grids mean wind and solar output is being increasingly curtailed to avoid overloading networks, wasting electricity and adding costs for consumers.

Some of Europe's biggest planned power interconnector projects have stalled in ‌recent ⁠years due to lack of funds.

A lack of grid investment has also contributed to Europe having higher energy prices than China and the United States, a frequent complaint from industries that say steep bills undermine competitiveness.

In an attempt to get investments going, governments agreed to give the EU a bigger role in planning its power network.

The Commission will develop a centralised EU plan for cross-border electricity infrastructure and investments for the next decade, and work with grid operators and companies to get projects off the ground.

Energy Commissioner Dan Jorgensen said the bloc's current lack of top-down grid planning was like "27 different people trying to do a jigsaw puzzle without looking at the picture on the box".

EU countries will now negotiate the final rules with the European Parliament.

($1 = 9.7043 Swedish crowns)

(Reporting by Kate Abnett, editing by Milla Nissi-Prussak)