Policy note: Mobilising private capital for European grids

Achieving climate neutrality in the EU by 2050 will require an unprecedented expansion of cross-border electricity grids. However, the current investment model, which is dominated by national transmission system operators and characterised by limited public budgets, is leading to a persistent financing gap. This Policy Note introduces a novel EU-wide regulatory-financial framework – a harmonised congestion-revenue-based cap-and-floor regime – designed to systematically mobilise diverse sources of private capital across all phases of grid development. By combining regulatory innovation with a multi-phase investment logic and separating asset ownership from system operation, the model opens the market to non-traditional investors while safeguarding system integrity. Unlike existing national regimes, the proposed structure aligns risk allocation, revenue regulation, and investor participation across Member States. Building on insights from transition finance research, the framework translates Europe's decarbonisation goals into a deployable investment architecture that links financial system diversity with effective and efficient grid development. Aligned with Action 9 of the EU Action Plan for Grids and the revised TEN-E Regulation, the paper provides a tangible and scalable policy pathway to close the interconnector investment gap, enhance capital-market access, and accelerate Europe's grid transformation in support of climate neutrality. • Introduces a phased investment structure aligning evolving risk profiles with diverse private capital sources. • Proposes an EU-wide congestion-revenue-based cap-and-floor regime for interconnector investment. • Opens grid investment to non-traditional investors via separation of asset ownership and system operation. • Provides a harmonised, scalable regulatory model to accelerate cross-border grid expansion in line with EU policy goals.