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Europe’s electricity and gas networks are facing growing pressures from climate change. Heatwaves,
floods, droughts, wildfires, and storms are occurring with greater frequency and severity, exposing
vulnerabilities in energy infrastructure and raising the spectre of cascading failures across
interconnected systems.
While European energy policy has long concentrated on efficiency, decarbonisation, and security of
supply, systematic attention to climate resilience is only beginning to emerge. Regulatory frameworks
at both EU and national levels still struggle to capture the value of resilience investments. Traditional
tools such as cost–benefit analysis often fail to account for high-impact, low-probability events, leaving
adaptation undervalued. Without reforms, Europe risks underinvesting in measures that could protect
households, businesses, and critical services from climate-driven disruptions.
In this issue paper, we examine how resilience can be embedded in the governance of energy
infrastructure. We explore policy and regulatory options across both EU-level and national
frameworks, concentrating on transmission and distribution system operators. We identify gaps in
current regulatory practice and set out possible approaches for reform.
Key themes include:
• Climate risks: Europe’s energy systems face intensifying hazards, from heatwaves and
droughts in southern regions to storms and icing in the north. These events disrupt generation,
transmission, and distribution, with impacts exacerbated by cross-sector interdependencies.
• Regulatory gaps: Although EU policy and regulation acknowledge resilience, concrete
regulatory tools remain underdeveloped. Cost–benefit methodologies and performance
incentives do not systematically account for climate risks, and mandatory climate risk
assessments are fragmented.
• Embedding resilience: Options include strengthening project evaluation through scenario
analysis and catastrophe modelling; ensuring cost recovery for capital and operational
adaptation measures; refining performance-based incentives; introducing more systematic
climate risk disclosure; and improving access to insurance and risk-sharing mechanisms.
• Coordination: Because Europe’s energy systems are interconnected, resilience planning
cannot stop at national borders. EU-level stress testing, joint emergency planning, and
stronger cross-border coordination will be essential.
The analysis suggests that there is no single solution. A combination of approaches may be needed,
ranging from reforms to EU-level legislation and project assessment guidelines to national incentive
schemes and insurance frameworks. The challenge is to balance consistency across Europe and
flexibility for regulators to respond to diverse local risks.
Investment in resilience can be seen as a form of insurance: costs incurred today to reduce the
likelihood of greater losses tomorrow. How these costs are recognised in regulation, how
responsibilities are divided between EU and national levels, and how risks are shared between
operators, consumers, and insurers are questions the answers to which will shape Europe’s ability to
safeguard its energy systems under a changing climate.
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