After years of falling demand, Europe’s electricity needs are climbing again, fueled by electrification, data centers, and electric vehicles. According to Goldman Sachs Research, the continent must invest roughly $3.5 trillion in its power sector over the next decade to avoid the risk of a supply crisis.

Between 2008 and 2024, Europe’s power demand shrank by about 7% amid the global financial crisis, industrial decline, and the pandemic. But starting in 2026, demand is projected to grow by 1.5-2% annually as homes, factories, and transport systems electrify. Rising air conditioning use and the surge in data centers are expected to add further strain.

Renewables continue to be at the heart of Europe’s energy transition. Up from 65% today, renewables will be around 75% of installed capacity by 2030. While this shift reduces carbon emissions, increased reliance on weather-dependent energy like wind and solar could weaken reliability unless sufficient backups are in place.

Another challenge is aging infrastructure. With much of Europe’s grid being over 40–50 years old and not designed for decentralized, renewable-heavy systems, reserve margins could fall to zero by 2029, creating the risk of shortages.

1. To prevent deficits, Goldman Sachs estimates that Europe will need €2–3 trillion in investments between 2026 and 2035, nearly double the amount spent in the previous decade. Of this, €1.2–1.4 trillion must go into transmission and distribution, while €1–1.4 trillion is required for new generation.The investment surge offers opportunities across the electricity value chain, with electrification-focused companies projected to grow profits by 9–11% annually through 2030. But challenges remain: supply chain constraints, permitting hurdles, and affordability. As Goldman’s Alberto Gandolfi cautions, “The cost of inaction could cost Europe significantly more.”

End Notes

Source: https://www.goldmansachs.com/insights/articles/europe-needs-3-point-5-trillion-dollars-of-power-investment-through-2035