The European Union’s energy landscape is undergoing rapid transformation, following major technological and geopolitical developments. After a decade of flat demand and a dip in 2022‑2023, EU electricity consumption is now expected to rise as transport, heating, and industry electrify, and data centres and AI loads grow. The European Commission projects that electricity will supply 50% of final energy use by 2040, twice its 2024 share, while global demand rose 4.3 % in 2024.
The Draghi Report on European competitiveness highlights the strategic value of a low-carbon power system, for Europe’s economic security and competitiveness. Replacing volatile, expensive fossil-fuel imports with ever-cheaper solar and wind can cut input costs for European industry, closing today’s price gap with the United States and China, and increase EU firm’s competitiveness in global markets.
A significant share of the EU's electricity demand is expected to be met by wind and solar generation. Electricity generation from photovoltaic solar (PV solar) and wind overtook fossil-based electricity production across the EU in 2024. The share of electricity generation from PV solar and wind grew from less than 1% at the turn of the century to 31% in 2024. Solar and wind generation are estimated to increase from 570 GW of installed capacity in 2024 to 1,200 GW by 2030 and more than 2,500 GW by 2040.
The integration of solar and wind power presents system-wide challenges that require coordinated infrastructure and flexibility solutions. The variable nature of these technologies creates new demands on the electricity system, requiring solutions such as grid-scale electricity storage technologies - such as Pumped Hydro - as well as upgrades to transmission and distribution networks, as well as cross-border grid connections. Additional flexibility solutions on both the supply and demand sides are also essential to ensure a well-functioning energy system. These elements are interdependent and must be developed in tandem to ensure system reliability and efficiency. This report therefore focuses on regulatory barriers to the development of solar, wind, pumped hydro storage, and grid infrastructure, as well as related business models.
Regulation must catch up with technology. Up to date, simplified rules are critical to enable the continued scaling of variable renewables like wind and solar, while safeguarding security of supply, affordability and competition. Yet most current frameworks still reflect the needs of a centralised, thermal-generation1 era and do not align with renewable realities:
1. Decentralised supply. Thousands of small generation points with bi-directional power flows instead of one-way delivery from large plants.
2. Different technological and economic characteristics. Unlike dispatchable thermal plants, renewables are decentralised, weather-dependent, and characterised by lower capacity factors. They also face comparatively high capital costs (despite opportunities for comparatively low investment requirements) vs. traditional generation and come with near-zero marginal costs. These shifts affect how electricity from variable renewables is generated, how it may be priced and balanced in real time. They also create new system requirements – including energy storage, synthetic inertia, and enhanced flexibility – to maintain stability and efficiency. All these enable new types of market players and business models.
3. New grid requirements. To better cope with different types of electricity current generated (AC/DC mix), low inertia, optimal siting where the sun shines and wind blows, often far from load centres (where electricity is consumed), and intermittency stress legacy infrastructure and stability of the grid.
Given these differences in characteristics regulatory reforms are needed. Whilst several reforms have already been undertaken at the EU level providing overarching measures, provisions and guidelines, these often still need to be implemented at the national and subnational levels. Important insights were drawn from two regional case studies carried out in Apulia (Italy) and Algarve (Portugal), which helped test the tool across two distinct legal and institutional systems and highlighted the critical role of regional and local authorities in shaping effective deployment frameworks. These demonstrated that many rules that are critical to the development of new energy projects are sub-national in nature, issues such as spatial planning and permitting rules as examples, as these were often made for large plants and not for many smaller distributed generation points.
This self-diagnostic tool aims to support these regulatory reforms targeting all levels of government within the EU. This OECD project introduces a unique diagnostic tool designed to help policymakers systematically identify and reduce regulatory barriers to renewable energy deployment. It explicitly targets both national and sub-national authorities, providing a structured assessment that allows users to score the readiness of their regulatory frameworks, prioritise areas for reform, and track progress over time. Using a tailored approach to specific technologies and market segments – such as utility-scale PV, or innovative solutions such as Agrivoltaics, and residential systems – the tool ensures that regulatory barriers are assessed in a technology-specific and context-sensitive manner. This approach is particularly valuable for sub-national governments, which often play a critical role in permitting and spatial planning but are frequently overlooked in broader regulatory assessments.
Following this methodology, the Project has identified five key common regulatory barriers to market deployment:
Unclear legal roles and responsibilities, particularly for emerging technologies and business models. National and EU rules often lag behind technological developments, resulting in uncertainty regarding the classification and regulation of emerging solutions such as floating solar (PV solar on bodies of water), agrivoltaics (PV solar on agricultural land) and energy-aggregation services. Ambiguity on the legal admissibility of activities, applicable siting requirements, and conditions for grid access increase regulatory risk and inhibit investment. This not only restricts innovation but also hinders the emergence of new business models. Inconsistent rules across Member States further fragments the internal market and limits scale-up.
Unclear rules on cost-allocation and remuneration. Innovative solutions such as agrivoltaics, as well as long-duration storage and ancillary services like frequency regulation face unclear rules on taxation or remuneration eligibility, for example. Without a predictable revenue stack and costs, the cost of capital for these solutions rises, which weakens incentives for market access of new services and business models.
Spatial-planning frameworks misaligned with renewables. Local, regional and national land-use plans are updated infrequently, are often outdated and rarely recognise or designate suitable zones for wind or solar. Divergent buffer-zone rules – regulations setting minimum distances from homes, protected areas, or infrastructure – and varying permitting thresholds create patchwork siting criteria, prolonging project timelines and increasing investor uncertainty.
Complex and lengthy permitting. Permitting remains one of the most visible and persistent barriers. Projects routinely navigate sequential approvals – from environmental impact and aviation clearance to heritage – which may involve dozens of agencies with overlapping mandates and no digital one-stop portal, extending timelines to six to ten years. The temporal mismatch – upfront capital expenditure versus back-loaded approvals – obliges developers to commit funds before power-price, grid-capacity and ancillary-service conditions are knowable, elevating uncertainty.
Bottlenecks in grid expansion and optimisation. Rules often prioritise traditional capital expenditure (CAPEX) over more forward-looking approaches such as grid optimisation, digitalisation, and anticipatory investment. In many cases, there are no clear rules to enable more flexible solutions, such as shared connection points or hybrid installations (e.g. solar plus storage). In addition, outdated “first-come, first-served” connection queue systems can delay viable renewable energy projects and lead to inefficient use of available grid capacity.
