Four Ways 2026 Will Chart the Future of Europe’s Power Sector
Europe’s power sector is living through something humans rarely do: growing pains and aging pains at the same time.
On the growth side, Europe’s electricity demand is bouncing back after two decades of contraction, with Goldman Sachs expecting 1.5–2% annual growth from 2026 onwards, as a result of the EU’s aggressive decarbonization strategy and the massive push for electrification of heat and transport.
This growth comes with a surge in complexity and volatility, due to the shift to Variable Renewable Energy and the growth of connected devices and EV charging that induce large, short-burst loads - not to mention the new demands posed by data centers and the rise of AI.
These trends also reveal the sector’s aging pains. An EU report estimates that 40% of Europe’s distribution grids are over 40 years old. These networks designed for one-way flows must now evolve into a two-way, variable and decentralized power system. This system will be more labor-intensive than before and could require 250,000 additional workers across Europe at a time when the sector’s existing workforce is retiring in large numbers.
In this context, 2026 looks like the first year of the sector’s next chapter. Here are four trends that should define it.
#1 CapEx Pressures Meet High Debt Levels
In the wake of the recent blackout in Spain and Portugal, the Financial Times warned that “a huge increase in investment is needed in the sheer infrastructure such as cable and pylons to connect new generation capacity and move electricity from remote wind and solar farms into city centers, as well as to protect the network against extreme weather.” At the European level, this overhaul could represent a €584bn investment this decade.
But these investment needs find power and utilities organizations already under significant financial strain: ING notes that the 40 largest companies in the sector saw gross debt grow 70% between 2020 and late 2024, to €890bn.
The second challenge is the sheer operational complexity: companies often have several thousands of concurrent projects underway, and large volumes of small projects are typically a low-oversight, high-inefficiency situation. To maintain control at this scale, they must establish consistency in data, processes and standards across regions and departments.
In 2026, these demands will point to the need for better execution as much as bigger budgets. Project management approaches that can give visibility at the portfolio levels and optimize the use of resources, such as Enterprise Project Performance (EPP) should gain traction. The use of AI in project controls should add another layer of discipline by surfacing delays and budget risks early, making them easier to manage across thousands of simultaneous initiatives.
#2 The Reluctant Digitalization of DSOs
Making this massive, unprecedented CapEx program financially viable and physically manageable will require digitalization of the transmission and distribution systems. Specifically, the sheer volume of new connections, grid modernization and distributed generation necessitates a transition from reactive, manual grid management to proactive, data-driven operation.
Across Europe, regulators have begun to force the issue. Germany’s 2024 “Paragraph 14a” allows distribution system operators (DSO) to throttle controllable loads (like EV chargers and heat pumps) but also obliges heavy investment so new loads can connect. In the UK, Ofgem’s RIIO-2 rules require distribution network operators (DNOs) to publish digitalization plans covering real-time visibility, smart meters and “digital twins” of local grids.
That digitalization is needed is a consensus view. But in practice, there is still a long way to go, particularly in countries where distribution is scattered among tens or hundreds of small operators. A recent Hexagon survey found 67% of power firms still rely on paper-based processes, 76% say information comes too late or is already obsolete, and 78% report severe operational impacts from poor data integration.
In 2026, the path forward will already be visible in places, with utilities moving from static network maps to real-time, data-fed models that simulate grid behavior and outages. For example, German operator E.ON says its digital twin now covers over one-third of Germany’s distribution network and 55 million network components such as cables or transformers. Similarly, joint industry reports call digital twins the “recommended solution” for monitoring, predicting and optimizing grids. These twins can integrate SCADA, smart meters, GIS and enterprise asset management (EAM) databases so operators can forecast local congestion and intervene proactively.
#3 The Search for Stabilizers Favors Cross-Border Trade and Nuclear
2025 has also shown the urgent need to stabilize Europe’s electricity infrastructure.
Part of the solution is accelerated investment in cross-border transmission lines, allowing surplus power in one region to balance shortages in another. While the EU mandates that 70% of physical transmission capacity be available for cross-zonal trade by December 31, 2025, the actual number has lagged, particularly on the most congested lines.
The problem is partly a matter of incentives, which the EU could try to correct, both by making more funding available, and by signaling the possibility of infringement procedures.
In 2026, the search for greater stability should also favor nuclear’s fortunes, as nuclear plants provide both a low-carbon energy source and critical baseload stability to backstop weather-dependent renewables. With 14 reactors planned and 3 under construction, Eastern European countries could affirm their nuclear ambitions in 2026 and use new plants to reduce dependency on coal and Russian or US oil and gas imports.
This optimism comes with caveats: Nuclear plants are the epitome of heavy capital spending and long timelines. In the UK, Sizewell C is slated to cost £38-billion. Constraints on capital expenditure and public budgets could work in favor of small modular reactors, which are commonly estimated at €1–3 billion each.
To manage this strain, 2026 should also see companies adopt technologies that can accelerate crucial phases of design and construction, such as piping design and structural systems, and ensure adherence to the latest codes. Digital tools also help standardize best practices in construction and maintenance, optimize the engineering sequence and simplify calculations - work that France’s EDF estimates has saved tens of millions of dollars annually.
Digitalized maintenance extends these benefits beyond construction and into fleet operations. By connecting asset condition data, work history and engineering models in a single environment, operators aim to obtain a consistent view across an entire fleet rather than isolated sites. That visibility allows maintenance strategies to shift from reactive interventions to planned actions based on actual equipment condition and to avoid repeat visits and emergency work that consume scarce technician hours in crews already facing skills shortages.
#4 Software and Risk-Based Approaches Allow for Faster Grid Recovery
This brings us to the final crucial component of grid resilience: reliable software.
As traditional, largely manual networks transform through automation and AI for balancing supply and demand, software applications have become a central pillar of grid resilience.
Operators rely on advanced applications such as SCADA and real-time control and forecasting platforms to reroute power and coordinate assets in real time. Yet, this reliance cuts both ways: In several recent blackouts, such as the 2025 one in Iberia or the 2021 Texas power crisis, software limitations were a contributing factor. Past examples, such as the 2003 blackout in the Northeast United States, also serve as a reminder that, when control software or algorithms fail, outages can cascade.
Another key part of the resilience equation is cyber risks, at a time when state actors are actively targeting operational technologies (OT) at power utilities. In March 2025, it was revealed that a foreign state actor had spent 10 months infiltrating the operations of a regional utility in the United States, as part of a border campaign that has compromised more than 50 power plants and electric utilities. A 2025 report also found that the energy sector in Germany and the UK faced a sharp rise in attacks targeting their industrial operations.
To manage heightened risks, we expect 2026 to see a shift in focus and spending from prevention to recovery. This means deploying automated restoration tools like Fault Location, Isolation, and Service Restoration (FLISR) and, for OT specifically, implementing cyber recovery platforms that secure and restore baseline configurations for Industrial Control System (ICS) and SCADA assets.
We also expect greater use of risk-based models that can fine-tune the balance between risk, performance and costs - for example, using asset performance management tools.
Such approaches fit well with the constraints the sector faces: delivering on their service-level agreements while dealing with high financing needs, an imperfect existing technology stack and raised levels of operational risk, all while building for the future. These competing pressures will make 2026 a challenging year but a key one to build the future of Europe’s power grid. And, as a wise man once said: “If the future was easy, it’d be here by now”.