Europe’s energy system has entered a new phase, one defined less by access to supply and more by its ability to operate under sustained stress. Ahead of SuperReturn Energy Transition, Yana Popkostova, Founder & Managing Director, European Centre for Energy and Geopolitical Analysis, explains why energy security has re-emerged as a core national security issue, how electrification reshapes dependency, and why grids and execution capacity now define risk for investors and policymakers alike.
Q: Following the 2022 energy crisis, how has the definition of 'energy security' changed within the EU? Is it now viewed more as a national security issue rather than just an economic one?
A: The real shift since 2022 is not that energy security has become a matter of national security - it always was. What has changed is the nature of the exposure and the way vulnerability manifests.
In the pre‑2022 system, risk was geographically anchored: pipeline routes, a dominant supplier, a bilateral relationship. Today’s EU energy system is far more diffuse. Europe now operates within globally priced, tightly coupled markets, where price formation and industrial interdependencies, rather than physical interruption alone, define exposure. Energy security is thus shifting from supply to system integrity under stress.
This can be far more insidious, as laid bare by the Middle East conflict. Europe’s direct reliance on Gulf molecules is limited, yet it remains exposed to global price and allocation dynamics, particularly as disruptions to oil and LNG flows reverberate through refining systems and industrial value chains, from petrochemicals to fertilisers. The impact is therefore less about physical shortage and more about price dislocation and pressure on industrial competitiveness.
Energy shocks now cascade across transport, agriculture, fisheries, manufacturing and defence faster than institutions can respond. Despite post‑2022 adjustments, Europe remains painfully exposed, once again considering demand‑side coping measures reminiscent of the 1970s. In this sense, control has shifted further outward. Europe no longer has even the illusion of setting the terms of adjustment; it is left absorbing them. Electrification and decarbonisation will provide relief, but not immediately. While they reduce some geopolitical frictions, they introduce new concerns related to grids, digital networks and concentrated supply chains.
"Europe no longer has even the illusion of setting the terms of adjustment;
it is left absorbing them.”
- Yana Popkostova
The EU energy system is now more exposed to external shocks and more dependent on its ability to operate under stress. This is why energy security has reasserted itself as a strategic, and indeed systemic, concern, no longer defined only by access to supply, but by the resilience of interconnected systems. This firmly places energy security at the core of national security and strategic autonomy, particularly in a context of limited short‑term alternatives, industrial pressure, defence demands, fiscal constraint and two wars at Europe’s doorstep.
Q: As Europe moves away from fossil fuels, it faces a new dependency on critical minerals and technologies (batteries, solar panels) often controlled by a few nations, particularly China. How can Europe secure its supply chain without simply swapping one dependency for another?
The notion that Europe is “swapping one dependency for another” is analytically insufficient.
The energy transition redistributes value and risk across different layers of the system, with different temporalities and forms of control. In the fossil paradigm, exposure was concentrated upstream in resource ownership and extraction. In the emerging energy transition system, it shifts downstream into processing, manufacturing and system integration, where value capture and strategic leverage increasingly reside.
Europe accounts for roughly a quarter of global clean technology inventions, yet it has not translated this into industrial scale. The EU’s target to produce 40% of its clean technology needs domestically by 2030 reflects the depth of current dependency.
The gap between innovation and manufacturing has become a defining strategic vulnerability.
China, by contrast, understood this dynamic early, consolidating control across refining, manufacturing and deployment. What emerges is not dominance in individual segments, but coherence across the value chain, the result of deliberate sequencing, coordination and long‑term industrial strategy. The implication for Europe is not only resource dependence, but dependence on transformation systems outside its control.
"The EU energy system is now more exposed to external shocks, and more dependent on its ability to operate under stress.”
- Yana Popkostova
Risk has therefore changed. In fossil systems, disruption is immediate and visible. In electrified systems, constraints surface more slowly – but can prove equally binding as systems lock into specific technologies, supply chains and trade routes. New chokepoints – such as the Strait of Malacca, through which a growing share of clean technology trade now transits – reflect this shift from fuel corridors to technology flows.
This does not invalidate the transition – it clarifies its stakes. Clean energy introduces new dependencies, but also enables something fossil systems never did: the possibility of domestic control over generation capacity. In that sense, the transition is not about eliminating exposure, but about shifting from dependence on imported, finite fuels to systems where greater agency can be exercised over time.
The response is not self-sufficiency or stockpiling, which is neither realistic nor economically efficient, but selective de-risking: diversifying supply beyond single-country dependence, building domestic capacity in critical segments such as processing and advanced manufacturing, and anchoring industrial partnerships with trusted partners. This requires aligning industrial policy, trade policy and capital allocation – not just setting targets.
The question is no longer where resources are sourced, but who controls transformation, value capture, and system bottlenecks. Europe will not eliminate dependency, but for the first time, it has the agency to shape it – by deciding where it builds control.
Q: Europe has heavily substituted Russian pipeline gas with LNG, primarily from the US. What are the new geopolitical vulnerabilities inherent in this pivot, especially considering potential future US energy policies or global market volatility?
Europe’s shift from Russian pipeline gas to LNG represents a move from contractual dependency to market exposure.
Pipeline systems, for all their risks, operated within relatively stable contractual frameworks. LNG is a globally traded commodity, with volumes redirected in real time to the highest bidder. Europe is therefore exposed less to physical interruption than to competition for access.
This is visible in recent market dynamics, where US cargoes initially bound for Belgium were redirected to Asia as price differentials widened. Storage provides temporary insulation but does not alter the underlying market logic. Europe’s gas storage is currently below one‑third of capacity, limiting its buffer.
The United States, as the largest LNG exporter, captures upside from price inflation. Europe, as a price‑sensitive importer, absorbs it.
The effects extend beyond gas. Energy markets remain tightly interconnected through oil indexation, marginal power pricing and industrial feedstocks such as petrochemicals, ammonia and fertilisers. Gas price shocks transmit into electricity prices, industrial inputs and household costs, at a time when fiscal space is more constrained than in 2022.
The issue is no longer availability but price and conditions of access. In this system, Europe operates as a structural price‑taker, with direct consequences for industrial competitiveness and demand destruction.
Q: With 2026 risk assessments highlighting threats to critical infrastructure (subsea cables, pipelines), what is the most pressing requirement for securing the physical and digital energy network?
For decades, European energy systems were designed around fuels that could be stored, transported and rerouted. Electrified and decarbonised systems operate differently. They depend on synchronised, real‑time networks that must function continuously. As electrification accelerates across transport, heating and industry, the system becomes more tightly coupled. This fundamentally alters the risk profile. The priority is no longer protecting individual assets, but ensuring system operability under stress.
At the centre of this sits the grid. It is no longer a passive carrier of energy - it is the system. As the ENTSO‑E final report on the 2025 Iberian blackouts showed, outages were not caused by renewables but by grid constraints and system imbalance.
A structural mismatch is emerging between the pace of electrification and the capacity of infrastructure to absorb it. Around 40% of Europe’s distribution grid is over 40 years old. Investment cycles remain slow, fragmented and constrained by regulatory complexity. Vulnerability now stems less from generation scarcity than from the system’s ability to move and balance electricity in real time.
The challenge is fourfold: expanding capacity, integrating variable generation and demand response, securing digital systems and ensuring operational flexibility.
Critical components are a binding bottleneck. Procurement times reach 3 years for cables, 4 years for transformers and over 5 years for HVDC. At the same time, workforce shortages are acute: over a third of the energy workforce is nearing retirement. The constraint is no longer capital but delivery capacity.
Layered onto this is a less visible, but key dimension: system control. Electrified systems depend on power electronics and digital systems, introducing new physical and operational vulnerabilities. Parts of these value chains, particularly in advanced power electronics, remain concentrated outside Europe.
Climate exposure compounds these risks, as grids operate under conditions – heat, drought, floods, and extreme weather – that accelerate degradation and increase the probability of failure.
So, the next energy shock is unlikely to be a supply interruption, but a failure of system operability – triggered by infrastructure constraints, digital vulnerabilities, and climate stress.
The most pressing requirement is therefore execution at scale: accelerating grid expansion, securing industrial capacity and rebuilding the technical workforce.
EU’s challenge is no longer defining targets – it clearly excels at that – but delivering infrastructure at the speed and scale required to sustain the system, and advance the low-carbon transition, which, in and by itself remains Europe’s only chance to catch the chimera of energy security eventually.
Q: How are policies like the EU's Industrial Accelerator Act, or competition with the US Inflation Reduction Act (IRA), affecting foreign direct investment (FDI) into the European energy transition?
A: The emerging EU Industrial Accelerator Act and the US Inflation Reduction Act are restructuring capital allocation in the energy transition, illustrating how industrial policy now shapes the geography of value creation. The effect is already visible: capital is becoming more selective and increasingly priced around execution risk.
The US has altered these conditions by providing long-term fiscal visibility, standardised incentives, and relatively streamlined deployment pathways - reducing uncertainty from permitting to revenue stabilisation. This has acted as a magnet for capital.
Europe is moving in the same direction but from a more constrained position. The IAA signals a shift towards an industrial strategy, yet the investment environment remains limited by structural frictions. Three dominate: slower permitting and delivery timelines, fragmented national frameworks, and infrastructure bottlenecks - particularly grid capacity.
The IRA does not necessarily offer higher returns, but it offers clarity on how those returns can be realised; despite some policy adjustments under the current administration’s One Big Beautiful Bill, the overall trend of US clean energy investment remains positive. Europe, by contrast, still embeds execution uncertainty, shaping the selectivity of capital allocation rather than deterring it outright, even as clean energy investment in Europe remains robust. As highlighted by Draghi and Letta, Europe’s constraint is not ambition, but coherence and delivery capacity. For investors, this means that risk is no longer only regulatory – it is delivery: whether projects can be built, connected and scaled on time.
The result is selective reallocation: capital gravitates towards jurisdictions combining scale, policy clarity and speed of delivery.
The competition is therefore not only over capital, but over execution credibility. FDI will flow to jurisdictions that convert policy into deployable projects at scale. Europe’s challenge is therefore not signalling intent – it is delivering at speed and scale. If the IAA, currently in the legislative pipeline, translates into a credible execution framework, Europe would be better positioned to compete for – and further attract – global capital.
Q: In what ways has the current geopolitical climate changed the risk-return profile for longterm renewable energy projects in Europe? Are we seeing a shift towards shorter-term, lower-risk investments?
A: The key shift is that renewable risk is becoming less asset-specific and more system-dependent. Renewable projects were historically priced on technology costs, subsidies, and power price expectations. That model is no longer sufficient. Returns are now determined less by the asset itself and more by the system into which it is being deployed.
Key variables now extend beyond capex, offtake, and technology performance to grid access, curtailment risk, supply-chain resilience, and system integration.
Geopolitical shocks feed directly into project economics through input costs, financing conditions, infrastructure delays, and market volatility. Even as renewables reduce exposure to fossil fuel price swings, they remain embedded in an investment environment shaped by global industrial competition, concentrated manufacturing, and constrained delivery chains.
In Europe, a growing disconnect has emerged between deployment ambition and system readiness: projects can be financed, but not always connected; capacity installed, but not always integrated efficiently. As a result, congestion, curtailment, cannibalisation, and permitting delays are becoming primary drivers of return. Value is therefore shifting from standalone generation towards assets that enable system flexibility: storage, grids, interconnections, balancing capacity.
This places infrastructure at the centre. Grid expansion and system integration require coordinated public-private frameworks, as execution risk cannot be absorbed by private capital alone. As a result, some capital is shifting towards shorter-duration, lower-complexity projects where execution risk is contained. Long-term capital is not retreating – it is becoming more selective, favouring jurisdictions and projects that combine policy support with infrastructure readiness and delivery capacity.
The transition is entering a new phase: the question is no longer who builds capacity, but who can deploy it into systems that remain stable as electrification deepens and geopolitical volatility persists.
For investors, the repricing is clear: risk has shifting from technology to system operability. Capital will flow not to where capacity is planned, but to where systems can absorb and sustain it. That is now the defining condition for capital allocation in the transition.
This is a far more consequential shift. 