Digital Twin of the European Electricity Grid: A Review of Regulatory Barriers, Technological Challenges, and Economic Opportunities

Abstract

The European Union (EU) is advancing a digital twin of its electricity grid as a flagship initiative to accelerate the dual transitions of decarbonization and digitalization. By creating a real-time virtual replica of the EU-27 power network, policymakers and industry stakeholders aim to enhance grid efficiency, resilience, and renewable energy integration. This review provides a comprehensive analysis of the three critical dimensions shaping the digital twin’s development: (1) regulatory barriers, including fragmented policies, inconsistent data governance frameworks, and the need for harmonized standards and incentives across member states; (2) technological challenges, such as achieving interoperability, integrating real-time data, developing robust cybersecurity measures, and ensuring scalable infrastructure; and (3) economic opportunities, centered on potential cost savings, optimized asset management, new flexibility services, and pathways for innovation and investment. Drawing on European Commission policy documents, regulatory reports, academic studies, and industry projects like the Horizon Europe TwinEU initiative, this review highlights that significant groundwork has been laid to prototype and federate local grid twins into a cohesive continental system. However, achieving the full potential of a pan-European digital twin will require additional regulatory harmonization, more mature data-sharing protocols, and sustained financial commitment. This review concludes with an outlook on the strategic convergence of policy reforms, collaborative R&D, and targeted funding, emphasizing how institutional momentum, federated architectures, and cross-sector integration are advancing a secure, resilient, and economically viable digital twin that is envisioned as a foundational layer in the operational and planning infrastructure of Europe’s future electricity system.

1. Introduction

Europe’s electricity system is undergoing a profound transformation driven by two overarching imperatives: decarbonization and digitalization [1]. As renewable energy sources proliferate and the electrification of transport and heating accelerates, power grids must become smarter, more responsive, and more efficient to accommodate fluctuating generation and increasing demand [2]. In this context, the concept of a digital twin, a sophisticated virtual model of the physical electricity grid that remains continuously synchronized with real-world data, has emerged as a key enabler [3]. While the term “digital twin” is used broadly across sectors, in the context of power systems, it can be differentiated into three main types: (1) asset-level twins, which simulate the condition and behavior of specific grid components such as transformers or substations; (2) system-level twins, which represent the grid topology, flows, and operational constraints in real time; and (3) multi-domain or federated twins, which integrate grid data with inputs from other infrastructures such as weather, transport, or markets. This review focuses on the system-level and federated digital twins that underpin large-scale operational and planning capabilities across the European electricity grid. These layers are central to enabling the cross-border coordination and flexibility required by the EU’s energy transition vision [4,5]. By mirroring the state of assets and grid conditions in real time, a digital twin can support predictive analysis, scenario simulation, and data-driven decision-making [4,6].

Recognizing this potential, the European Union (EU) has placed the development of a continental-scale digital twin of the electricity grid at the forefront of its policy agenda [1]. In October 2022, the European Commission released its “Digitalizing the Energy System—EU Action Plan” [7], explicitly calling for a secure and federated digital twin to improve grid intelligence, drive innovation, and support real-time system operations [1]. In December 2022, Europe’s transmission system operators (TSOs), represented by ENTSO-E, and distribution system operators (DSOs), under the EU DSO Entity, signed a joint declaration of intent to collaboratively advance this vision [8,9], an initiative that was welcomed by the European Commission as instrumental for enhancing flexibility, reliability, and coordinated planning across member states [10].

Several large-scale projects have emerged in response to these mandates. Central among them is the Horizon Europe-funded TwinEU consortium, which unites 75 partners from over a dozen EU countries [11]. TwinEU adopts a “federated” or “system-of-systems” approach, linking local digital twins operated by TSOs, DSOs, and technology providers into a unified platform spanning high-voltage transmission networks down to low-voltage grids [3]. By demonstrating applications, such as congestion management, predictive maintenance, and renewable energy integration, at eight pilot sites across eleven countries, TwinEU aims to validate how modular sub-twins can collectively represent Europe’s interconnected power system [5,12]. This aligns with the broader collaborative ethos in the EU electricity sector, where multiple operators and regulatory bodies across 27 member states must cooperate.

Beyond these targeted initiatives, the EU is laying critical groundwork in data policy and high-performance computing that directly supports digital twin development. The Common European Energy Data Space (CEEDS), created under the EU Digital Strategy, provides a framework for interoperable and secure data exchange [13]. Meanwhile, the Destination Earth (DestinE) program, focused on building a high-fidelity digital model of the planet, could eventually enable multi-domain integration by linking electricity system models with climate and mobility datasets [14]. Such synergies underscore the ambition to harness advanced analytics for holistic energy system planning in pursuit of Europe’s climate targets, which include installing over 600 GW of renewable capacity by 2030 and reaching climate neutrality by 2050 [15].

Despite this momentum, significant challenges remain on the path to a fully functional digital twin of the European electricity grid. Regulatory fragmentation and data governance rules must be harmonized to facilitate cross-border data sharing [4]. Technologically, achieving real-time observability and interoperability across millions of distributed assets requires standardized interfaces, robust cybersecurity measures, and scalable computing infrastructures [5]. Economically, stakeholders need clear incentives and funding mechanisms to invest in digital twin solutions that promise long-term system benefits but require substantial upfront outlays [16].

While several reviews have discussed various technical aspects of digital twins in the context of smart grids or energy systems [12,17,18,19,20,21,22], this review provides a novel contribution by focusing specifically on the European electricity grid through the lens of regulatory, technological, and economic barriers. It synthesizes not only academic and technical literature but also integrates EU policy frameworks, legislative instruments, and flagship projects such as TwinEU. Unlike previous work that treats digital twin development as a predominantly technical endeavor, this review offers a structured, transdisciplinary synthesis that connects regulatory misalignments, infrastructure readiness, and investment rationales, providing a policy-relevant roadmap for realizing a federated EU-wide grid digital twin.

This article provides a comprehensive review of these challenges and opportunities, drawing upon policy documents, academic research, and recent industry projects such as TwinEU. The discussion focuses on the EU-27 context and assesses how to align regulations, technology, and economics to realize the vision of a continent-wide digital twin. Section 2 presents the methodology and details the scoping review framework, search strategy, inclusion criteria, and data extraction process, following PRISMA-ScR guidelines. Section 3 examines the regulatory and policy barriers, which include issues such as data-sharing frameworks and standards harmonization. Section 4 explores the technological state of the art and the remaining gaps, including modeling complexities, interoperability challenges, and cybersecurity. Section 5 discusses the economic rationale for digital twin investments and reviews cost–benefit analyses, market innovations, and potential funding strategies. Section 6 concludes with an outlook on how Europe’s ambitious digital twin initiatives will contribute to a more resilient, efficient, and decarbonized electricity system.

2. Methodology

This scoping review was conducted in accordance with the PRISMA-ScR guidelines, which are particularly suited for capturing emerging and interdisciplinary domains such as digital twins in the energy sector. The primary aim was to systematically map the current landscape of regulatory, technological, and economic factors influencing the development of a pan-European electricity grid digital twin. A predefined protocol was followed that included the definition of review scope, identification and selection of sources, data charting, and synthesis of results into thematic categories.

The review was guided by three research questions, derived from the conceptual focus established in the Introduction Section:

• What are the main regulatory and policy barriers that hinder the development and deployment of a pan-European digital twin of the electricity grid, and how can these be addressed?
• What are the key technological challenges in building and operating a secure, real-time, and interoperable digital twin of the EU electricity grid?
• What are the economic opportunities and investment rationales associated with the grid digital twin, and how can funding mechanisms and incentives support its implementation?

Eligibility Criteria: To capture the multidisciplinary scope of the topic, the review included a broad range of sources. Eligible materials comprised peer-reviewed academic publications such as journal articles and conference proceedings, as well as official documents from the European Commission, ENTSO-E, the EU DSO Entity, and other institutional bodies. Grey literature, including regulatory proposals, strategic roadmaps, technical reports, industry white papers, and relevant standards, was also included. Only sources explicitly addressing digital twins in the context of the European electricity grid were selected. Documents focused on AI, IoT, or energy policy without relevance to digital twin applications were excluded. The inclusion period spanned from 2013 to 2025 in order to reflect the regulatory and technological evolution since the introduction of GDPR and the Digital Europe Program. Only English-language publications were considered.

Information Sources and Search Strategy: A multi-pronged search strategy was adopted to ensure coverage of relevant academic, institutional, and policy sources. Academic databases including Scopus, Web of Science, and IEEE Xplore were queried using combinations of the following keywords: “digital twin” AND “electricity grid” OR “power system” AND “Europe” OR “EU” AND “regulation” OR “policy” OR “data governance” OR “interoperability” OR “investment.” In parallel, targeted searches of EUR-Lex, the European Commission’s energy and digital policy portals, ENTSO-E, CEER, and the EU DSO Entity websites were conducted to retrieve official legislative texts, action plans, and strategy papers. Additionally, Horizon Europe and CORDIS project databases were reviewed to extract insights from funded initiatives such as TwinEU and InterConnect. Google-based searches refined with site-specific filters, e.g., site:europa.eu, were used to identify grey literature and industry white papers not indexed in academic databases.

Source Selection: After removing duplicates, all sources were screened by title and abstract or executive summary according to the eligibility criteria. Records that were irrelevant, including those without a European focus or lacking relevance to digital twin technology in power grids, were excluded. The remaining full texts were reviewed for final inclusion. A PRISMA-style flow diagram (Figure 1) documents the selection process and summarizes the number of sources identified, screened, excluded, and included.

Data Extraction and Synthesis: A structured data extraction form was used to chart key attributes from each included source. These included (a) regulatory and policy frameworks such as GDPR, NIS2, the Data Act, and interoperability mandates, (b) technological components such as modeling architecture, data integration, and ICT infrastructure, and (c) economic considerations such as cost–benefit analyses, investment models, and market incentives. A thematic synthesis approach was employed to group findings into the review’s three core dimensions: regulatory barriers, technological challenges, and economic opportunities. Within each theme, inductive sub-categorization was applied. For example, under regulatory barriers, sub-themes such as data privacy, cybersecurity, and regulatory misalignment were identified. Cross-cutting insights, including the policy impact on technical design and investment incentives for interoperable systems, were also noted. Selected findings were tabulated to highlight key EU policy instruments, major R&D projects, and funding frameworks relevant to the digital twin initiative. Narrative synthesis was used to link the evidence to the review’s guiding research questions.

3. Regulatory Barriers to Implementing an EU-Wide Grid Digital Twin

Implementing a digital twin for Europe’s electricity grid faces significant regulatory and policy challenges arising from a multi-layered governance structure. EU-level directives and regulations establish general rules, while national laws and regulatory authorities govern the practical details of grid operation and data management [23]. This fragmented regulatory environment complicates initiatives requiring extensive cross-border coordination and uniform data exchange practices [24]. Additionally, existing policies and standards frequently predate the latest digital and smart grid advancements, creating a mismatch between regulatory frameworks and current technological needs [25]. Key regulatory barriers involve constraints related to data governance, privacy, and cybersecurity, fragmented regulatory regimes and outdated market structures, insufficient standardization and interoperability mandates, and a lack of regulatory incentives promoting digital innovation [4]. Overcoming these challenges is essential to enabling the successful deployment and efficient operation of a pan-European grid digital twin.

3.1. Data Governance, Privacy, and Security

Data is the foundation of a digital twin, but its effective use faces significant regulatory barriers related to governance, privacy, and security [4]. A pan-European digital twin requires the aggregation of extensive datasets, including real-time sensor measurements, smart meter data, grid status, and market information, which often cross organizational and national borders. However, under current regulations, data sharing is hindered by privacy constraints, confidentiality concerns, and the absence of clear frameworks that define ownership and conditions for data exchange [25].

The European General Data Protection Regulation (GDPR) strictly governs personal data, such as household energy usage, requiring anonymization or explicit consent for reuse [26]. Although operational data like grid status and power flows typically are non-personal, utilities still treat such data as sensitive due to security or commercial implications [4]. Variations in national regulations further complicate data sharing, with discrepancies in how DSOs and TSOs manage and exchange data, leading to fragmented and inconsistent practices across member states. For instance, some jurisdictions restrict DSOs from sharing detailed consumption data, even if anonymized [23].

To mitigate these issues, the European Commission has proposed establishing a Common European Energy Data Space within its broader Data Strategy [13]. This federated infrastructure aims to facilitate standardized and secure data sharing, eliminate data silos, and establish uniform rules for data access and interoperability. Additionally, the EU Data Governance Act and the proposed Data Act aim to foster regulated and fair data sharing, clarifying rights to data generated by IoT devices and industrial equipment [27,28]. However, despite their promise, these new laws currently do not explicitly address the specialized needs of electricity grid digital twins, leaving uncertainties and potential legal risks unresolved [4].

Cybersecurity further compounds these regulatory challenges. The Network and Information Security Directive (NIS2 Directive) mandates rigorous cybersecurity measures within the energy sector, requiring operators to adhere to risk management, incident reporting, and minimum-security standards [29]. Although essential to safeguard digital twins from cyber threats, complying with NIS2 regulations could increase complexity and costs, potentially slowing deployment [25].

In summary, overcoming regulatory barriers related to data governance, privacy, and cybersecurity is crucial for realizing a pan-European grid digital twin. Initiatives such as the European Energy Data Space, coupled with GDPR compliance and robust cybersecurity frameworks under NIS2, must provide clear legal definitions, standardized data-sharing practices, and effective security controls. Early adoption of privacy- and security-by-design principles can further facilitate regulatory compliance, fostering stakeholder trust and ensuring reliable and secure data flows across the digital twin ecosystem.

3.2. Standardization and Interoperability Policies

A major regulatory challenge in implementing a pan-European grid digital twin lies not in the presence of prohibitive rules, but in the absence of binding mandates for standardization and interoperability [24]. Although the EU has made progress in harmonizing market rules and network codes, the digital aspects of the electricity sector, particularly in relation to ICT interfaces, data formats, and communication protocols, have not advanced at the same pace [25]. This regulatory gap has resulted in a fragmented landscape where individual TSOs, DSOs, and vendors deploy proprietary or incompatible systems, making seamless integration across national borders extremely difficult [5].

Interoperability is essential for the federation of digital twins to function reliably. Without common data models and standardized interfaces, efforts to share data or link digital systems are often hindered by mismatches in format, semantics, or protocols [5,12]. Industry studies and surveys consistently identify this fragmentation as a core challenge, with utilities reporting ongoing difficulties in collecting, integrating, and standardizing data from diverse sources [25]. Even when relevant standards exist, such as the Common Information Model (CIM) developed by the IEC and supported by CEN, CENELEC, and ETSI [30], their adoption remains inconsistent and is mostly voluntary [24]. As a result, data often stays confined to siloed, vendor-specific formats that limit scalability and reuse [5].

Efforts to address these issues are underway, though still insufficient. The EU’s Smart Grids Task Force and various industry entities have outlined frameworks and guidelines, while the European Commission’s Action Plan emphasizes the importance of interoperable and open digital solutions [1]. Forthcoming initiatives, such as the Implementing Act on interoperability for energy metering data, signal increased regulatory attention [31]. However, these initiatives lack the enforceability and coverage necessary to support a fully interoperable digital twin ecosystem [25]. For example, although smart meter standardization has seen some progress through EU coordination, national variations in specifications and consent mechanisms still impede full interoperability [24].

The slow pace of regulatory alignment stands in contrast to the rapid development of digital technologies. Although industry associations and working groups such as the joint task force of ENTSO-E and the EU DSO Entity are working toward defining common use cases and roadmaps, progress remains dependent on voluntary adoption [4]. In the absence of regulatory mandates, these initiatives are unlikely to achieve the uniformity needed for plug-and-play integration of digital twins across Europe [24].

To overcome this structural barrier, EU policymakers must play a more active role. This includes endorsing or mandating specific standards through instruments such as Implementing Acts, incorporating interoperability requirements into grid codes, and aligning funding mechanisms with compliance to open standards. Public funding programs, like those under the Digital Europe Program, can also prioritize projects that demonstrate adherence to common architectures. A consistent regulatory framework that incentivizes modular, vendor-neutral, and interoperable system design is essential for avoiding technological lock-in and ensuring long-term flexibility and competition.

In summary, while standards for digital twin implementation exist, their regulatory status is often non-binding, inconsistently applied, or narrowly scoped. Bridging this regulatory gap is critical to unlocking the full potential of a pan-European digital twin, ensuring that fragmented legacy systems and proprietary solutions do not obstruct integration, scalability, and innovation.

3.3. Legacy Regulations and Fragmented Responsibilities

The implementation of a pan-European grid digital twin faces fundamental challenges due to legacy regulatory structures and fragmented responsibilities. The existing legal and institutional frameworks that govern Europe’s electricity sector, including the Clean Energy Package such as the Electricity Regulation (EU) 2019/943 and Directive (EU) 2019/944, along with national network codes, were developed in a context that did not anticipate the emergence of integrated, data-driven platforms like digital twins [32]. As a result, these frameworks do not provide an explicit mandate for such systems and fail to clearly define roles, responsibilities, or cost recovery mechanisms for the actors involved in their development and operation [4].

Traditionally, TSOs and DSOs have operated within strictly defined roles, organized along national boundaries, and focused on managing physical grid assets [23]. However, a digital twin that spans voltage levels and crosses borders requires close operational coordination between TSOs and DSOs, as well as the ability to act on shared insights generated through predictive analytics [4]. This introduces new regulatory questions: Who is permitted or obligated to build and maintain the digital twin? Who holds liability for actions taken based on its recommendations? And how are costs allocated or recovered under existing tariff schemes? Current regulations do not provide satisfactory answers to these questions, leading to legal and operational uncertainty [4].

Furthermore, the governance structure for the digital twin remains undefined. Whether such a platform is to be centrally managed by an EU institution, led by a consortium of TSOs and DSOs, or overseen by a third-party entity, each model carries distinct regulatory implications [4]. Industry-led initiatives such as the joint ENTSO-E and EU DSO Entity Task Force have begun to sketch a roadmap and define use cases, but voluntary cooperation alone may not suffice [4]. Without formal legal mandates and regulatory oversight from bodies like ACER or national regulatory authorities, coordination risks becoming fragmented and inconsistent [23].

Cross-border alignment presents another significant barrier. National differences in regulations, including data privacy requirements, IT service classifications, and cost allocation rules, can create conflicting obligations and hinder the seamless integration needed for a pan-European digital twin [24]. For example, some countries enforce strict data localization laws that prohibit the cross-border sharing of operational grid data, while others adopt technical standards that are incompatible with those of neighboring countries [25]. These inconsistencies make it difficult to establish a unified digital infrastructure and may discourage stakeholder participation [4].

The regulatory gap becomes even more pronounced when the digital twin extends into cross-sectoral domains such as gas, weather, or environmental planning. In these cases, sector-specific regulations and digital laws, including those related to data sharing, cybersecurity, or AI-based decision-making, may overlap or conflict, leading to legal ambiguity [33]. The absence of regulatory coherence across these domains can result in contradictory requirements and increased administrative burdens, which ultimately slow the deployment of the digital twin [4].

The current regulatory paradigm also tends to prioritize investments in physical infrastructure over digital solutions. This bias is embedded in many grid codes and licensing requirements, which recognize physical reinforcements but often overlook or undervalue virtual tools such as digital twins [16]. Updating regulatory frameworks to explicitly incorporate digital solutions, for instance, through revised grid codes or the inclusion of Smart Grid Indicators (SGIs) in performance assessments, will be essential to legitimize and incentivize the adoption of these technologies [34].

Furthermore, the issue of accountability must be addressed. As digital twins increasingly inform operational decisions, regulators will need to establish clear rules around liability, transparency, and oversight. This includes defining who is responsible when decisions based on the twin’s outputs lead to adverse outcomes, and ensuring that algorithmic recommendations are auditable, explainable, and compliant with broader principles of accountability and system reliability.

In sum, legacy regulations and institutional fragmentation represent a major structural barrier to the realization of a pan-European grid digital twin. Overcoming this challenge will require targeted regulatory reform, including clearer mandates for digital platforms, formalized governance structures, harmonized national rules, and mechanisms for cross-sectoral coordination. Encouragingly, EU institutions and regulatory bodies have begun to acknowledge these needs, and the development of the digital twin may serve as a litmus test for the EU’s ability to adapt its energy regulation to a digitally integrated future.

3.4. Economic Regulatory Barriers and Incentives Misalignment

A critical regulatory barrier to the implementation of a pan-European grid digital twin lies in the misalignment of economic incentives within existing regulatory frameworks. Most electricity network operators in the EU are regulated under models that prioritize capital investments in physical infrastructure rather than digital and data-driven innovations [16]. These models, particularly those based on the Regulated Asset Base (RAB) approach, allow TSOs and DSOs to earn returns on capital expenditures such as substations or transformers, but often provide no comparable incentive for investments in software platforms, analytics tools, or cloud-based services that support a digital twin [23].

Digital solutions frequently fall under operational expenditures (OPEX), which are either excluded from the RAB or treated as cost-saving measures rather than strategic investments [16]. As a result, even when digital tools could deliver superior grid efficiency or defer costly reinforcements, operators face a paradox: spending less may reduce their allowed revenue. Several studies, including a comprehensive assessment by Monaco et al., have confirmed that this CAPEX-OPEX bias is among the most significant deterrents to grid digitalization in Europe [24]. Regulatory frameworks often overlook or undervalue intangible benefits, such as improved system observability, predictive maintenance, or enhanced integration of renewables, especially when these accrue over a longer timeframe or benefit parties beyond the investing operator [16].

Some regulators have begun to address this misalignment. TOTEX, or total expenditure approaches, treat capital and operational expenditures equally within a unified regulatory framework and are being piloted or implemented in selected jurisdictions, including the United Kingdom and parts of the Nordic region [16]. In addition to cost neutrality between CAPEX and OPEX, recent studies also highlight the role of profit-sharing mechanisms under TOTEX schemes, which allow utilities to retain part of the cost savings if actual expenditures fall below regulatory forecasts [35]. This strengthens the incentive to deploy efficient digital solutions, including digital twins, and aligns utility behavior with long-term system optimization objectives. These approaches aim to shift the regulatory focus toward overall performance and outcomes rather than specific input categories. Innovation allowances and funding mechanisms, which offer additional revenue or cost recovery for pilot projects, are also emerging as tools to support experimentation with digital technologies [23]. However, adoption remains uneven across the EU, and many national regulators still lack a formal framework for incentivizing innovation. In several member states, digital investments continue to be categorized as non-allowable or are expected to deliver efficiency gains without corresponding remuneration [24].

Another regulatory challenge involves the cost allocation and financial justification for a cross-border digital twin. While a pan-European grid twin would provide system-wide benefits such as reduced curtailment, improved reliability, and accelerated renewable integration, these gains are diffuse and accrue to multiple stakeholders across national boundaries [4]. However, there is currently no regulatory mechanism to equitably distribute the costs of such a shared digital infrastructure. Unlike physical interconnectors, which are governed by specific EU-level cost allocation rules, digital platforms are not covered by established frameworks [36]. This creates uncertainty for TSOs and DSOs considering large-scale investments in digital twin capabilities, particularly when national regulators may not acknowledge or compensate costs that primarily benefit systems in other countries [16].

Furthermore, the time horizon used in regulatory evaluations adds to the problem. Determination periods typically span three to five years, while the benefits of digital twins, such as asset lifetime extension, operational savings, or improved planning, often emerge over a longer timeframe [16]. Some societal benefits, including enhanced decarbonization and increased system resilience, may also fall outside the scope of current tariff-setting methodologies [24]. To address this, regulators require tools that can incorporate forward-looking, system-wide, and external benefits into their cost–benefit analyses. The revised TEN-E regulation has taken a step in this direction by expanding eligibility for EU funding to smart grid projects of common interest, including digital infrastructure that demonstrates measurable benefits such as capacity optimization or CO₂ reduction [33].

Lastly, regulatory sandboxes and innovation roll-out mechanisms are being explored to test digital solutions under relaxed conditions, allowing regulators to observe their impact before formally integrating them into the mainstream framework [23]. Countries like the Netherlands and France have introduced such sandboxes, and there is increasing interest in expanding them at the EU level to de-risk early deployments of digital twins and generate the evidence base needed for broader regulatory reform [24].

In summary, economic regulation across the EU continues to favor tangible, traditional infrastructure investments over digital innovations, creating a disincentive for deploying digital twins [16]. Overcoming this requires modernizing incentive frameworks through TOTEX-based models, formal innovation allowances, regulatory sandboxes, and cost-allocation mechanisms that reflect the shared and long-term value of digitalization [24]. Encouragingly, EU regulators such as ACER and CEER have acknowledged these gaps and are exploring pathways to align economic regulation with the digital transition [23]. With coherent adjustments, the regulatory environment can shift from an obstacle to an enabler of the European digital twin grid.

3.5. Policy and Legal Mandates

In the absence of formal mandates, adoption can lag. Some experts argue that achieving a true EU-wide digital twin might eventually require legislative action from the European Union, similar to how the rollout of smart meters or the implementation of common grid codes was mandated [37]. Until now, the approach has been voluntary and based on incentives. If this proves insufficient, the European Commission could consider proposing requirements in future energy legislation, for example, as part of the next revision of the Electricity Regulation, for TSOs and large DSOs to participate in collective digital twin frameworks and to share the necessary data [4]. The challenge is to design such mandates in a way that avoids over-prescription, especially given the varying levels of readiness among stakeholders. In addition, aligning cybersecurity regulations with the digital twin initiative is crucial. The digital twin will likely be classified as critical infrastructure because it will play a central role in grid operations. The upcoming NIS2 Directive and other cybersecurity regulations will impose strict requirements on its operators, such as the implementation of security measures and incident reporting. Policymakers must ensure that these requirements are both proportionate and harmonized to achieve high levels of security without imposing excessive burdens [29].

3.6. Addressing the Barriers

In summary, the regulatory barriers to a pan-European grid digital twin relate to data issues such as privacy, access, and interoperability, to institutional frameworks including harmonization, roles, and coordination, and to economic regulation concerning incentive alignment [4]. The European Union is aware of these challenges. The mandate of the Joint Task Force and the regulatory workstream within the TwinEU project has been established to develop solutions [5]. Potential approaches include the creation of an EU-wide regulatory sandbox for the digital twin, allowing for trials of data sharing and new market mechanisms, as well as the revision of incentive schemes, which is currently under consultation by ACER and CEER [23]. Another option is to formalize the governance of the digital twin, for example, by establishing an EU entity or introducing a legal obligation for ENTSO-E and the EU DSO Entity to maintain it [10]. As one industry analysis noted, the harmonization of European regulations must be promoted, and policy must evolve in parallel with technology to unlock the full benefits of the digital twin [25]. Bridging the gap between the existing regulatory framework and the requirement of a continental digital twin remains a work in progress and will determine the pace and effectiveness of its implementation.

To consolidate the regulatory insights discussed above,

Table 1. Summary of regulatory barriers, critical issues, and proposed solutions for the EU-wide grid digital twin.

Category	Identified Barriers	Critical Remarks	Proposed Solutions
Data Governance and Privacy	GDPR constraints and national fragmentation	Current regulations are insufficiently harmonized	Support CEEDS, privacy-by-design, and data-sharing frameworks
Interoperability	Lack of mandatory standards	Voluntary adoption is too slow	Enforce standards via implementing Acts
Legacy Regulation	No mandate for digital twin platforms	Outdated roles and cost allocation rules	Reform grid codes and define governance
Incentives Misalignment	CAPEX bias in regulation	Discourages digital investment	Promote TOTEX and innovation allowances
Legal Mandates	No requirement for participation	Risk of fragmented progress	Consider EU-level mandates for participation

summarizes the main barriers identified in the literature, alongside critical evaluations of current frameworks and proposed regulatory solutions advanced by the authors. This synthesis is intended to highlight both the structural shortcomings and the emerging pathways for reform that underpin the regulatory feasibility of a pan-European grid digital twin.

4. Technological Challenges and Integration Issues

Building a digital twin of the European electricity grid is an enormous technological undertaking, rife with challenges in system integration, data management, modeling, and cybersecurity [20]. The electric power system is often cited as one of the most complex machines ever built, and creating its real-time digital replica at EU scale pushes the state-of-the-art in several domains [3]. Here we analyze the key technological hurdles: interoperability and data integration, real-time simulation and computational demands, model accuracy and validation, cross-sector integration, and cybersecurity and reliability of the digital twin [5].

4.1. Interoperability and Integration Complexity

One of the most fundamental technological challenges in building a pan-European grid digital twin is achieving true interoperability across a diverse landscape of systems and data sources [5]. Europe’s electricity grid is a federated “system of systems” operated by dozens of TSOs and hundreds of DSOs, each historically developing their own SCADA, EMS/DMS, GIS, and data management tools, often based on proprietary formats and differing conventions [25]. These legacy systems were not designed to interoperate, especially not at the scale and granularity required by a continent-wide, real-time digital twin [24].

Integrating these disparate systems into a unified digital representation requires addressing heterogeneity at multiple levels: syntactic, which involves data formats and communication protocols; semantic, which involves terminology and ontologies; and pragmatic, which involves business processes and operational contexts [5]. For example, the substation identifier used by one operator may not align with another’s naming scheme, and their telemetry protocols may differ, using IEC 60870-5-104, OPC UA, or vendor-specific interfaces. As a result, data fusion becomes a time-consuming and error-prone task, with grid operators frequently reporting mismatches in data formats as well as incomplete or inconsistent datasets [24]. A joint survey by ENTSO-E and the EU DSO Entity confirms that system operators across Europe consistently identify interoperability and data integration as major bottlenecks [4,12].

Standards such as the IEC Common Information Model (CIM) provide a shared data schema for power system components and have been adopted in initiatives such as ENTSO-E’s CGMES-based grid model exchanges [25]. However, implementation remains inconsistent. Transmission system operators have made more progress than distribution system operators, and many DSOs have not yet adopted CIM extensions or aligned their internal models with the standard [24]. In addition, CIM does not cover all layers of integration. Real-time data flows, for example, require further standardization in telemetry protocols and API interfaces [5]. Without harmonized models and communication standards, there is a risk that each local digital twin will remain an isolated silo, which would undermine the broader vision of a federated and interoperable system [4].

The challenge is further intensified by the need for continuous and bidirectional data exchange. A digital twin is not a static database but a dynamic system that must both ingest and produce data in real time [20]. Achieving this requires robust interface specifications, event-driven architectures such as those using MQTT or Kafka, and potentially message buses that support publish and subscribe communication among different grid actors [5,38]. Many utilities still depend on batch data exchanges or manual imports, which are not capable of providing the temporal precision required for accurate and timely operation of a digital twin [24].

Integration must also reach beyond the power system. A high-fidelity digital twin will need to incorporate data from multiple domains, including weather forecasts, electricity market conditions, mobility patterns such as electric vehicle charging, and sector-coupling data from systems such as gas networks and heating infrastructure [5]. Each of these domains operates with its own data conventions and formats, which necessitates the use of advanced translation layers and semantic mediation [20]. The European Commission’s Digitalization of Energy Action Plan has emphasized the importance of cross-sector interoperability and has encouraged the alignment of data spaces across energy, mobility, and finance to support broader system integration [1].

Solutions must bring together both technology and governance. On the technological side, middleware platforms, semantic data layers, distributed data lakes, and standardized APIs can help bridge differences between systems [5]. Reference architectures, such as those being developed under TwinEU, provide blueprints for modular and vendor-neutral integration [3]. From a governance standpoint, regulatory mandates or common requirements, as discussed in Section 3.2, will be necessary to accelerate the adoption of shared standards and to promote convergence across member states [4]. While voluntary alignment is beneficial, it is unlikely to scale quickly enough to support real-time coordination at the pan-European level [24].

In summary, interoperability is not merely a technical detail but a structural precondition for the success of the grid digital twin. Without it, the digital twin risks becoming a patchwork of disjointed sub-models rather than a coherent and actionable representation of the European electricity grid. Achieving seamless integration will require sustained collaboration, investment in modernization, and an iterative process of refining standards, conducting tests, and aligning institutions. It is one of the most demanding yet also one of the most essential dimensions of digital twin development.

4.2. Real-Time Modeling, Simulation, and Data Integration at Scale

Developing a real-time digital twin of the European electricity grid presents a formidable set of technical challenges at the intersection of large-scale modeling, simulation fidelity, and high-throughput data integration [20]. At its core, the goal is to create a virtual replica of one of the most complex engineered systems in existence. This infrastructure includes hundreds of thousands of kilometers of transmission lines, thousands of substations and generators, and tens of millions of distributed assets such as electric vehicles, rooftop photovoltaics, batteries, and smart appliances [3]. Capturing the dynamic behavior of this system in real time and at scale requires an unprecedented level of modeling sophistication and computing capability [5].

A central challenge lies in balancing model granularity with computational feasibility. High-fidelity simulations that capture full electrodynamic behavior across all voltage levels, down to each inverter or smart meter, are computationally infeasible for real-time application [20]. On the other hand, models that are too simplified may fail to detect local instabilities or may misrepresent the grid’s dynamic responses. Achieving real-time performance therefore requires multi-resolution, hierarchical modeling. This involves using coarse-grained models at the continental level while incorporating fine-grained sub-models where greater detail is needed [5]. Federated computing architectures, in which each grid operator maintains and simulates its segment of the network while exchanging boundary conditions, represent one promising approach [3]. However, synchronizing these modular simulations to maintain a coherent global state in real time remains a complex technical task [20].

Equally critical is the need for robust and continuous data ingestion. While transmission systems are generally well instrumented with SCADA systems and phasor measurement units (PMUs), distribution networks, particularly at the low-voltage level, often lack real-time observability [39]. In such cases, the digital twin must rely on advanced state estimation techniques to infer missing values from limited measurements [20]. The integration of real-time and near-real-time data from smart meters, distributed energy resources, and other sources introduces additional challenges related to data latency, synchronization, and completeness [5]. Telemetry signals may arrive at different time intervals or with varying levels of accuracy, requiring reconciliation methods to generate a temporally consistent and operationally useful state of the system. This depends on advanced time-aligned data architectures, including time-series databases, distributed storage solutions, and high-throughput data pipelines [24].

Beyond operational data, the digital twin must integrate historical records, asset metadata, weather forecasts, market signals, and sensor data from other sectors such as gas, heating, and transport [5]. The growing interdependence of electricity with these sectors means that a high-value digital twin must include cross-domain linkages. For example, it should be capable of modeling the impact of electric vehicle charging surges on distribution networks or simulating demand-side flexibility influenced by heating systems [20]. This requires the development of modular APIs and semantic coupling mechanisms that enable the electricity twin to interoperate with sector-specific twins or data platforms, such as those developed under the Copernicus or Destination Earth programs [5]. These efforts to integrate multiple domains remain in the early stages and present substantial challenges related to modeling, data harmonization, and institutional coordination.

Scenario simulation introduces an additional layer of complexity. One of the defining features of a digital twin is its ability to perform parallel what-if analyses, such as assessing the effects of line outages, load spikes, or market disruptions, while simultaneously maintaining real-time monitoring of the actual system [20]. These predictive capabilities require high-performance computing, often supported by hybrid cloud and edge computing architectures. In such setups, local processing manages time-sensitive tasks, while cloud infrastructure handles more computationally intensive forecasting [5]. The European Commission’s Digitalization of Energy Action Plan explicitly acknowledges this need and promotes the use of cloud and edge computing to enable the real-time operation of digital twins across the energy system [1].

Flexibility and adaptability of the simulation platform are also essential. As the grid evolves, with increasing integration of inverter-based resources, hydrogen infrastructure, and demand-side technologies, the software supporting the digital twin must evolve accordingly [20]. Traditional monolithic simulation tools are not well suited to this task. Instead, modular and containerized microservices architectures, where components can be updated or replaced independently, are emerging as the preferred design approach [5]. This enables model developers to upgrade specific parts of the digital twin incrementally without disrupting overall functionality, and to add support for new technologies as they are introduced [24].

Accuracy and trustworthiness are foundational to operational adoption. Operators must be able to rely on the twin’s outputs for situation awareness and decision-making. This requires rigorous verification and validation (V&V) processes, continuous calibration against real-world measurements, and mechanisms for anomaly detection [20]. Early implementations of digital twins will likely operate in parallel with human operators, building confidence through repeated validation over time [5].

Emerging technologies such as artificial intelligence and machine learning offer promising opportunities to accelerate simulations and improve model responsiveness. For example, surrogate models trained on physical simulations can approximate power flow solutions much faster than conventional solvers. However, the use of these techniques raises concerns related to transparency, interpretability, and physical plausibility, which require careful integration into trusted simulation workflows.

In summary, enabling real-time, high-fidelity modeling and simulation of the European electricity grid at scale is an immense undertaking. It requires not only advanced computational and data infrastructure but also carefully designed model architecture, real-time data handling, multi-domain integration, and strong organizational coordination. Projects such as TwinEU and broader European initiatives like Destination Earth will play a central role in developing and validating the necessary technologies, architectures, and processes. As the European Commission has noted, the grid digital twin will not be built in a single step. Instead, it will emerge through a progressive and iterative process, beginning with pilot projects and gradually expanding to system-wide implementation. This will involve continuous refinement of models and platforms and steady advancement in the ability to replicate the energy system in real time.

4.3. ICT Infrastructure for Large-Scale Real-Time Operations

Developing a digital twin of the European electricity grid requires a robust and scalable ICT infrastructure capable of supporting real-time operations, large-scale data integration, and distributed computing [5]. This infrastructure serves as the nervous system of the digital twin, linking the physical grid to its virtual representation and enabling continuous observation, simulation, and forecasting [20]. A critical first step is to enhance observability across the grid. Although transmission networks are typically well instrumented with SCADA systems and phasor measurement units, many distribution networks, especially at the medium and low-voltage levels, remain insufficiently monitored [39]. The rollout of smart meters has improved visibility at the end-user level, but the data they provide often arrives at coarse time intervals and lacks the granularity required for real-time situational awareness [25]. Bridging this sensing gap will require the widespread deployment of new sensors and intelligent devices. However, implementing such deployments involves significant capital investment and integration complexity, particularly when coordination is needed across different regulatory regimes and levels of infrastructure maturity [24].

Real-time operation also depends on a reliable and high-capacity communications infrastructure. TSOs may operate private fiber-optic networks, but DSOs typically rely on heterogeneous combinations of fiber, wireless, and public telecommunications networks [25]. A continental-scale digital twin places additional demands on this infrastructure, particularly for latency-sensitive applications where control decisions must be based on sub-second data flows [5]. Future technologies such as 5G and 6G, cited in the European Commission’s Digitalization Action Plan, offer potential improvements, but in the near term, investment in upgrading existing networks and ensuring interoperability across borders will be essential [1]. Communication networks must be secure, standardized, and capable of supporting the cloud-edge continuum that will likely characterize the twin’s architecture [20]. In such a hybrid approach, edge devices perform latency-critical computations locally, while cloud platforms aggregate and process system-wide data for broader forecasting and analysis [5].

The digital twin will ingest vast volumes of data, including real-time telemetry, smart meter readings, weather forecasts, market prices, and asset metadata. Managing this data influx requires scalable time-series databases, high-throughput data pipelines, and flexible integration architectures that can align diverse data models and formats [24]. European initiatives such as the Common European Energy Data Space aim to standardize data exchange and promote common reference models, but the responsibility for implementation remains with system operators and developers [13]. Real-time simulation capabilities must also be supported by sufficient computational resources. The digital twin will need to perform power flow calculations, stability assessments, contingency analyses, and probabilistic forecasts across a system that may include millions of nodes [20]. Traditional simulation tools, often built for use by individual utilities, are not designed to handle these computations at the necessary speed or scale. To meet this challenge, federated modeling approaches are being explored. These approaches allow regional or national operators to simulate their respective domains independently while exchanging boundary conditions with a central coordination layer [3]. This hierarchical strategy helps distribute the computational workload but introduces additional challenges related to synchronization and interface consistency [5].

High-performance computing and cloud infrastructure are indispensable in this context. The EU’s investment in exascale computing through initiatives like EuroHPC and Destination Earth provides a foundation for executing complex multi-scenario analyses at the continental scale [40]. Designing simulation platforms that can exploit parallelism, modularity, and containerized services is critical to leveraging these resources [5]. At the same time, the digital twin must remain tightly synchronized with the physical grid. This means continuously updating inputs with real-time data and recalculating system states as conditions change [20]. Achieving this requires precise timestamping, advanced state estimation algorithms, and possibly increased deployment of PMUs to enable time-aligned, wide-area measurements [39].

Integration with legacy systems is another significant challenge. Many TSOs and DSOs operate EMS and DMS platforms based on older standards and protocols, which cannot be replaced overnight. The digital twin must interoperate with these systems via adapters and protocol converters, accommodating a heterogeneous landscape of technologies [25]. Moreover, the platform must be highly available, scalable, and resilient, operating with the same level of reliability as the physical grid it mirrors. This demands fault-tolerant architectures, elastic computing environments, and rigorous cybersecurity protections [20]. The scale of investment required is considerable; the European Commission estimates that at least EUR 170 billion will be needed by 2030 to modernize ICT systems across the EU’s electricity networks [41]. These investments cover not only the digital twin but the broader digitalization of grid operations, automation, and intelligence [1].

Despite these challenges, Europe is well positioned for success. Several utilities and technology providers are already piloting grid digital twin platforms, and initiatives such as ETIP SNET are promoting shared research, best practices, and architecture development. The convergence of advanced sensing, high-speed communication, scalable computing, and real-time analytics is increasingly within reach. If implemented with strong technical foundations and effective institutional coordination, the resulting ICT infrastructure will establish the basis for a fully integrated digital representation of the European power system. This will enable faster, smarter, and more resilient grid management across both national borders and interconnected sectors.

4.4. Cybersecurity and Reliability of the Digital Twin

The development of a pan-European grid digital twin introduces significant opportunities for enhanced system intelligence, but it also brings substantial cybersecurity and reliability challenges. As the digital twin becomes more deeply integrated into grid operations and begins to inform real-time decisions or support automated control, it effectively becomes part of the critical infrastructure [4]. This designation makes it a high-value target for cyberattacks, which could have serious consequences. A successful intrusion could alter the twin’s data inputs or outputs, leading to misinformed operator actions, reduced situational awareness, or even broader system instability [29]. In the most severe case, a cyberattack could disable or take control of the twin, resulting in data loss, disruptions to control functions, or coordinated failures across the grid [25].

The digital twin significantly expands the traditional attack surface of grid operations. While legacy SCADA and energy management systems were often isolated and designed with built-in security, the digital twin is inherently connected. It receives data from thousands of endpoints, interfaces with both IT and operational technology systems, exchanges information across national borders, and may be hosted on cloud-based or hybrid infrastructures [25]. Each interface, whether a telemetry stream, user portal, or API, represents a potential vulnerability if not properly secured. As the system grows in scale, the complexity of managing its security posture increases accordingly. Potential threats include unauthorized data injection, such as feeding false telemetry to distort state estimation, ransomware attacks that impair system availability, and surveillance activities aimed at identifying grid weaknesses [29].

Ensuring cybersecurity for the digital twin requires a multi-layered and proactive approach from the beginning. Robust authentication and authorization mechanisms must be applied to all users and systems that access the twin. End-to-end encryption, secure coding practices, regular penetration testing, and continuous network monitoring with intrusion detection and prevention systems are essential baseline measures [29]. Equally important is the protection of data integrity, as operators must have full confidence that the information processed by the twin has not been altered. Solutions such as digital signatures, redundant telemetry sources, and real-time anomaly detection can help identify inconsistencies [25]. In fact, the digital twin itself may enhance cybersecurity by detecting discrepancies between expected and actual grid behavior that indicate potential cyber–physical anomalies [20].

The European Union’s regulatory landscape is evolving to support this shift. The NIS2 Directive, in particular, mandates enhanced cybersecurity practices across essential sectors, including energy [29]. In the context of the digital twin, this means that all participating TSOs, DSOs, and third-party service providers must adopt a consistent level of cybersecurity maturity. A single weak link, such as an under-resourced DSO with minimal cyber protection, could expose the entire ecosystem [25]. Uniform compliance across borders and organizations is therefore critical and may require joint certification schemes or shared security operations capabilities [4].

Beyond security, resilience must also be a core design principle. As reliance on the digital twin increases, so too does the requirement for its continuous availability [20]. Whether due to cyber incidents, software bugs, or hardware failures, outages must be anticipated and mitigated through system redundancy, distributed deployments, and fallback modes [25]. For example, edge computing architectures can provide localized operational continuity if central systems are compromised, allowing local grid segments to operate independently until coordination is restored [5]. Likewise, operational protocols must be in place for graceful degradation or manual override in cases where the digital twin’s recommendations cannot be trusted. Early-stage deployments should maintain human-in-the-loop control structures to prevent overdependence on automated recommendations until reliability is fully established [4].

Coordinated incident response is another critical element. The distributed and cross-border nature of the twin means that cyber events will rarely be isolated. Procedures must be developed for detecting, communicating, and responding to incidents across jurisdictions [29]. This may include pan-European cyber drills, shared threat intelligence channels, and integrated response protocols supported by institutions such as ENISA or a potential EU-level cybersecurity coordination center for digital twin infrastructure [42].

Cost and capacity imbalances across stakeholders present an additional hurdle. Larger TSOs may have in-house cybersecurity teams, but many smaller DSOs do not. To ensure system-wide resilience, shared cybersecurity services or federated monitoring centers could be established, allowing smaller actors to meet baseline requirements without duplicating high-cost infrastructure [25]. Such arrangements could be coordinated by a central European entity or through regulated consortia [4].

Cybersecurity and privacy are closely interconnected and cannot be treated in isolation. Although most of the digital twin’s data is technical and anonymized, certain use cases, such as demand-side management or the use of disaggregated smart meter data, raise concerns under the General Data Protection Regulation (GDPR). These concerns must be addressed through privacy-preserving data governance strategies that include data aggregation, pseudonymization, and strict access controls. Technical safeguards must be complemented by clear legal frameworks that define how data may be used, shared, and protected within the architecture of the digital twin.

In conclusion, cybersecurity and reliability are not peripheral concerns but fundamental prerequisites for the successful implementation of a European grid digital twin. As the system grows in scale and becomes more integrated into grid operations, it is essential to build a secure and resilient architecture from the beginning. This requires embedding security by design, aligning with evolving European regulations, ensuring consistent protection across all stakeholders, and preparing for both technical and organizational risks. The digital twin initiative may also act as a catalyst for strengthening the cybersecurity posture of the entire energy sector, transforming it from a fragmented system with uneven protections into a coordinated and secure digital infrastructure that supports Europe’s decarbonized energy future.

4.5. Human and Organizational Factors

While the technical aspects of a digital twin often receive the most attention, human and organizational factors are equally important to its success. The deployment, maintenance, and effective use of a pan-European digital twin present complex socio-technical challenges that rely on skilled personnel, institutional capacity, coordination across organizations, and a culture that is ready to embrace digital transformation [24]. Regardless of how advanced the technology may be, the twin will not achieve its intended value without the involvement of engaged and capable human actors [4].

A key barrier to digital twin implementation is the skills gap across the electricity sector. Developing and integrating digital twins requires interdisciplinary expertise in data science, software engineering, power systems modeling, and cybersecurity [24]. Although European transmission and distribution system operators have strong capabilities in electrical engineering and grid operations, many organizations, particularly smaller distribution operators, lack personnel with the digital skills needed to design, implement, and manage digital twin systems. According to the joint report by TSOs and DSOs, the shortage of human and technical resources is one of the most pressing challenges facing distribution system operators in their digital transformation efforts [4]. Limited staffing and competing operational demands make it difficult to dedicate time and expertise to innovation projects. These skill mismatches also affect areas such as advanced analytics, artificial intelligence, and IT architecture, which are becoming increasingly important for digital twin deployment [20].

Addressing this skills gap will require both upskilling in the current workforce and target the recruitment of new talent. Utilities must invest in training their existing personnel in the use of digital tools and may need to establish entirely new roles, such as digital systems architects, data governance officers, or grid simulation specialists [24]. EU-supported programs, including Horizon Europe and the BRIDGE initiative, are already contributing to the development of relevant curricula and training modules [43]. Events and platforms organized by ETIP SNET, including sessions focused on artificial intelligence and grid digitalization, reflect growing momentum in the sector to build digital capabilities [44]. However, these efforts must be significantly scaled up to meet the demands of the transformation envisioned through the digital twin [4].

Beyond individual skills, organizational change is another essential enabler. Implementing a digital twin often requires fundamental changes to workflows, organizational hierarchies, and decision-making cultures [24]. Grid operations that were traditionally guided by engineering judgment and established procedures may increasingly depend on model outputs and predictive analytics. This shift can encounter resistance, particularly when digital tools are perceived as opaque or when they appear to challenge established expertise. Building trust in the outputs of the digital twin, and in the broader move toward data-driven operations, depends on the availability of user-friendly interfaces, transparent decision-support systems, and phased implementation that delivers visible operational benefits [4]. Pilot projects that clearly demonstrate how the digital twin helped prevent a costly outage or optimized network reinforcement can be especially effective in generating internal support and acceptance [20].

Organizational silos within utilities present additional structural challenges. Digital twin projects require coordination across departments that have traditionally operated independently, including information technology, operational technology, planning, operations, and regulatory affairs. In many utilities, these departments have different priorities and use distinct terminologies, which makes sustained collaboration difficult. Successful implementation depends on the formation of cross-functional teams or digital innovation units capable of bridging these internal divides. The Monaco study highlights the importance of well-defined digital strategies and internal coordination mechanisms, noting that organizational misalignment remains a significant barrier to digital transformation in the energy sector [24].

At the inter-organizational level, deploying a continental digital twin necessitates close collaboration between TSOs and DSOs, as well as between national and EU-level actors. Historically, these interactions were limited and structured around clearly separated responsibilities. A digital twin, by contrast, requires shared development efforts, data exchange, and potentially joint decision-making based on model outputs [4]. Building trust, interoperability, and governance mechanisms among the more than 40 TSOs and over 900 DSOs in the EU is a significant undertaking [24]. The establishment of the EU DSO Entity and its cooperation with ENTSO-E is an important institutional response to this need, facilitating coordination through task forces and working groups [10]. Nevertheless, aligning diverse organizational priorities, investment timelines, and operational practices remains a non-trivial challenge [23].

Knowledge-sharing platforms are emerging as critical tools to support this alignment. The TSO-DSO report calls for dedicated European-level platforms to exchange digital twin use cases, lessons learned, and best practices [4]. EU-funded projects such as INTERRFACE and Platone have begun to establish such networks, fostering collaboration not just among grid operators but also with consumers, researchers, and technology providers [45]. These communities of practice can help prevent duplication of effort, accelerate learning curves, and build a common understanding of what a digital twin should deliver and how it should be used [5].

Another important human factor is usability. A digital twin that produces large volumes of complex data will have limited value if the information is not presented in a way that supports effective decision-making. Decision-support tools, visual dashboards, and alarm systems must be designed with careful attention to user experience. Poorly designed interfaces or excessive information can overwhelm operators rather than assist them [20]. Training simulators and shadow operation modes, which allow operators to practice using the digital twin alongside conventional tools, can help build familiarity and trust prior to full deployment [5].

Indeed, these challenges are increasingly recognized at the policy level. The European Commission’s Digitalization of Energy Action Plan explicitly calls for comprehensive stakeholder consultation and the inclusion of grid users in the design of the digital twin [1]. This reflects an important shift: the digital twin is not simply an engineering project but a collective socio-technical transformation. It will require shared vision, joint capacity building, and a sustained effort to align institutions, capabilities, and cultures across Europe’s energy landscape [4].

In conclusion, human and organizational readiness is not a secondary concern; it is a central pillar of digital twin success. Bridging the skills gap, addressing cultural resistance, dismantling organizational silos, and establishing collaborative structures are all essential to ensure that the digital twin becomes a trusted, effective, and sustainable component of grid operations. A digital twin is not only about advancing technological capabilities but also about reshaping how people work.

4.6. Addressing the Challenges

The European Union’s approach to addressing these technological challenges is multi-faceted. Through initiatives such as TwinEU and the collaborative efforts of the Joint Task Force, use cases are being clearly defined to provide direction for technology development [4]. For each use case, such as real-time grid observability or operational planning with high levels of distributed energy resources, the specific requirements related to data, models, computational speed, and other factors are identified. This helps guide developers in prioritizing efforts, often focusing on manageable subsets of the overall complexity [5]. In addition, a roadmap for technology development is expected, which will likely phase the deployment of the digital twin. The initial focus may be on coupling transmission system operator capabilities, followed by the gradual inclusion of distribution system operators, and eventually the integration of cross-sector components [3].

In the area of interoperability, European research is placing strong emphasis on open platforms. The InterConnect project under Horizon 2020, for example, produced a blueprint for interoperability on the Internet of Things within the energy sector, which can guide how devices and subsystems connect to the digital twin [46]. The European Union is also engaging with international standardization bodies. One of the key recommendations from the ENTSO-E and DSO joint report is to collaborate on interoperable digital twin standards and platforms using a system of systems approach [25]. Regarding data and high-performance computing, the alignment with European data spaces and the Destination Earth initiative will provide key technological assets, including data catalogs and exascale computing capabilities, which the digital twin can adopt rather than develop independently [13,17].

In summary, the technological challenges involved in developing a digital twin for the EU electricity grid are significant but can be overcome through coordinated effort. These challenges span the entire technology stack, including hardware such as sensors and computing infrastructure, software such as models and user interfaces, and system integration involving standards and cybersecurity. Europe’s strategy is to tackle these issues through collaborative innovation by sharing knowledge and prototypes through Horizon projects and by progressively aligning common solutions. Through this approach, the digital twin can move from a conceptual framework to an operational reality that is robust, accurate, and fully embedded in grid management practices.

To provide an integrated overview of the technological challenges analyzed in this section,

Table 2. Summary of technological challenges, limitations, and proposed solutions for realizing the grid digital twin.

Category	Key Technical Challenges	Critical Observations	Suggested Solutions
Interoperability	Legacy system silos and a lack of standardization	Major bottleneck to integration	Open platforms and mandatory standard adoption
Real-time Modeling	Inadequate data granularity and computational limits	High complexity, especially at low voltage	Use hierarchical/federated simulation
ICT Infrastructure	Communication latency and sensor deployment gaps	Risk of uneven coverage	5G/6G rollout and hybrid cloud–edge systems
Cybersecurity	Expanded attack surface	Varying DSO capabilities pose systemic risk	Uniform NIS2 compliance and shared security ops
Organizational Readiness	Skills gap and institutional inertia	Human factors are underappreciated	Upskilling, cross-functional teams, and pilot training

presents a structured summary of the main technical barriers, critical observations on existing limitations, and the authors’ recommended solutions. The table serves to distill the complex, multi-layered integration issues that must be addressed for the digital twin to achieve scalable, secure, and real-time operability across Europe.

5. Economic Opportunities and Benefits

Implementing a digital twin for the European electricity grid will require substantial investment and coordinated effort, as outlined above [41]. However, these costs and challenges are expected to be offset by a wide range of economic opportunities and benefits. A fully developed grid digital twin could unlock operational efficiencies, optimize the use of infrastructure, support more informed investment decisions, and foster innovation and market development [16]. This section examines the economic dimension of the digital twin by presenting cost–benefit analyses, identifying areas of cost savings and avoided expenditures, exploring new revenue models and market services, and considering how incentives and funding mechanisms can be designed to support its deployment [24]. The analysis is framed within the context of the EU-27 power sector, which is facing growing pressure to expand and modernize its grids to support the clean energy transition. This transformation alone will require investments amounting to hundreds of billions of euros, and any efficiency gain could result in significant financial savings for society [2].

5.1. Grid Optimization, Efficiency Gains, and Cost Savings

A key economic justification for a European grid digital twin is its ability to extract significantly greater value from existing infrastructure, which can help defer or even avoid the need for costly physical upgrades [16]. European electricity networks are facing increasing pressure due to the rapid deployment of renewable energy and the electrification of transport and heating. Traditional responses, such as constructing new transmission lines, substations, and transformers, involve expenditures that can reach hundreds of billions of euros [2]. By offering detailed real-time insights and predictive analytics, a digital twin allows system operators to manage the grid closer to its actual technical limits, unlock unused capacity, and make risk-informed decisions based on continuously updated data rather than relying on conservative planning assumptions [20].

Operational analytics generated by digital twin support techniques such as dynamic line rating, topology reconfiguration, and adaptive protection settings, all of which can increase transfer capacity without the need for additional physical infrastructure [20]. Field experience highlights the scale of these benefits. For example, Alliander and Siemens reported that a twin-enabled optimization platform could increase usable distribution grid capacity by up to 30 percent. Achieving this same increase through conventional grid reinforcement would have required hundreds of millions of euros in capital investment [41]. At the continental level, even a modest improvement in asset utilization of just a few percentage points could result in multi-billion-euro savings over the grid investment cycles projected between 2030 and 2050 [2].

Asset management is another domain where the twin yields direct economic dividends. Continuous condition monitoring and scenario-based stress analysis allow predictive maintenance that targets resources where failure risk is highest, extending equipment life and preventing unplanned outages [20]. Avoiding a major transformer failure or averting a large-area blackout delivers savings far beyond repair costs, because the societal value of lost load for industrial and commercial customers can reach tens of euros per kilowatt-hour unserved [47]. By improving reliability indices and reducing the frequency of redispatch or curtailment, the twin further cuts operational expenditure: Europe’s redispatch and congestion-management costs already run into the billions each year, a sizeable share of which could be avoided through better foresight and coordinated corrective actions [16].

Planning processes also benefit from the digital twin’s ability to simulate future scenarios with a level of precision not previously possible. Rather than over-engineering networks to accommodate worst-case projections, planners can assess specific combinations of non-wire alternatives such as energy storage, demand response, and reactive power control alongside traditional infrastructure reinforcements [20]. When the digital twin demonstrates that certain investments can be postponed or adjusted in scale, capital can be redirected to higher-value projects. Given the European Commission’s estimate that approximately EUR 600 billion will be needed for grid upgrades during this decade, even modest improvements in how projects are sequenced and sized could lead to savings of tens of billions of euros, ultimately reducing tariffs and easing the financial demands of the energy transition [2].

Efficiency gains also apply to day-to-day operations and customer interactions. Automating routine analyses, such as evaluating connection requests for rooftop photovoltaic systems or heat pumps, reduces the need for engineering labor and accelerates customer service. This is especially important as millions of new devices seek access to the grid [24]. Loss reduction provides another substantial benefit. Transmission and distribution losses account for several percent of all electricity generated. Smarter management of voltage and phase, supported by digital twin analytics, can reduce these losses and save terawatt-hours of energy along with significant amounts of CO₂ emissions each year [20].

Finally, enhanced renewables integration directly suppresses system costs. By forecasting congestion more accurately and coordinating remedial actions in advance, the twin minimizes renewable curtailment, avoiding the expenditure associated with compensating curtailed generators and replacing their output with more expensive thermal units [16]. The avoided curtailment during peak wind events in northern Europe alone represents hundreds of millions of euros each year, and the benefit will grow as renewable penetration rises [2].

The combined effects of higher asset utilization, deferred capital investment, reduced operation and maintenance expenditure, lower losses, and curtailed redispatch payments present a strong economic case for the digital twin. Preliminary cost–benefit assessments from EU-funded pilots indicate favorable benefit-to-cost ratios even when only a fraction of these savings is realized. From a broader macroeconomic perspective, the digital twin serves not only as a technological enhancement but also as a strategic efficiency instrument that can lower the overall cost of Europe’s clean energy transition, improve reliability, and accelerate customer connections.

5.2. Cost–Benefit Analysis and Investment Case

Demonstrating the economic soundness of a pan-European grid digital twin hinges on rigorous cost–benefit analysis (CBA) that captures both direct financial gains for network operators and wider societal value [16]. At its core, a CBA must quantify the reduction in capital expenditure achievable through better utilization of existing assets, the operating-expense savings from more efficient maintenance and congestion management, the avoided costs of unserved energy and renewable curtailment, and the improvements in reliability that can be monetized using standard metrics such as SAIDI, SAIFI, and the value of lost load [20]. Against these benefits stand the upfront and recurring costs of sensors, communications networks, computing platforms, software licenses, integration, cybersecurity measures, and training [24]. Because many of these costs are booked as operating expenses while most avoided grid reinforcements are capital projects, CBAs must bridge accounting categories and often adopt a long-term horizon: a reinforcement deferred five or ten years ahead still constitutes a present-value benefit if the digital twin enables that postponement [16].

The timeframe is therefore a decisive parameter. Initial investments may increase tariffs in the short term, but benefits over the medium and long term, such as reduced infrastructure costs, more affordable renewable integration, and lower balancing expenses, ultimately return value to consumers and society [2]. Studies commissioned by the Atlantic Council and the European Commission indicate that although digital upgrades increase current expenditure, they enable lower cost generation, support faster electrification, and eventually stabilize or reduce total system costs [48]. To reflect these dynamics, several EU projects have proposed dynamic cost–benefit analysis frameworks that evaluate advantages over the entire life cycle of an asset while accounting for social externalities, including avoided carbon pricing and spillover effects in industrial innovation [16]. At the policy level, these broader benefits are highly relevant, as European leadership in digital twin technologies could generate export revenues and create high-skilled employment opportunities that extend beyond the boundaries of conventional power sector accounting [25].

For network operators, the investment calculus depends heavily on regulatory remuneration. Traditional models that reward capital additions can undervalue software and data platforms classified as OPEX [16]. Moving to TOTEX-based incentive schemes, or granting specific innovation allowances, ensures that a euro saved by avoiding a line construction is at least as valuable as a euro spent on digital infrastructure [23]. Under such frameworks, the business logic is straightforward: if spending EUR 50 million on digital capability forestalls a EUR 200 million reinforcement, both operator finances and consumer tariffs benefit. Pilot projects are beginning to put numbers on these propositions. Within TwinEU, Artelys is conducting impact assessments of demonstration cases, translating improvements in forecast accuracy, market price convergence, and renewable hosting capacity into social-welfare gains [5]. Preliminary findings from national pilots, such as distribution-grid twins in the Netherlands and transmission-level studies in Germany, have already reported favorable benefit–cost ratios once avoided curtailment, deferred CAPEX, and reliability improvements are included [41].

Formal cost–benefit analyses are also prerequisites for accessing European Union funding instruments. The Connecting Europe Facility, Horizon Europe, and potentially the Projects of Common Interest framework all require transparent benefit metrics. These may include the amount of capacity unlocked per euro invested, the reduction in congestion or emissions per euro spent, or the contribution to innovation targets [49]. A digital twin that clearly increases transfer capacity, reduces redispatch payments, or improves cross-border price convergence is well placed to meet these criteria and attract blended finance or grant support [16]. On the private side, technology vendors and cloud providers are entering revenue-sharing agreements with utilities, confident that the resulting efficiency gains will outweigh license and service fees. This early commercial engagement further reinforces the investment case [41].

Potential disadvantages, such as the accelerated depreciation of legacy information technology platforms that may become obsolete with the introduction of the digital twin, are relatively minor and can be addressed through phased deployment strategies that allow existing systems to operate until the end of their service life. Furthermore, early pilot projects indicate that the risk of stranded digital assets is significantly outweighed by the benefits of avoiding unnecessary physical infrastructure expansion. A well-structured cost–benefit analysis that includes deferred capital expenditure, reduced operational expenditure, enhanced reliability, carbon reduction, and innovation spillover effects is highly likely to demonstrate net positive returns. As empirical evidence from pilot initiatives grows and regulatory incentives begin to favor overall system efficiency, the investment case for the digital twin will become increasingly persuasive to transmission and distribution system operators, regulators, financial institutions, and policymakers. This will help transform the vision of a data-driven, integrated European grid into an economically viable and self-sustaining reality.

5.3. Market Potential and New Services

A continental grid digital twin is more than a cost-containment instrument; it is a platform for innovation that can seed entirely new markets, business models, and revenue streams across the European energy ecosystem [16]. Building and operating the digital twin itself constitutes a sizeable industrial opportunity for providers of simulation software, cloud infrastructure, data analytics, sensor hardware, and cybersecurity solutions [25]. If European firms capture this growing demand, they will anchor high-value activity and intellectual property within the EU, while start-ups supported by programs such as the European Innovation Council can exploit open interfaces to develop specialized “apps” that plug into the twin, optimizing EV charging clusters, automating voltage control, or forecasting congestion in real time [50].

For network operators, the twin enables a strategic shift from passive asset ownership to active system orchestration. Detailed, location-specific insight allows TSOs and DSOs to procure flexibility from distributed energy resources through local auctions, remunerate demand-side response, and offer new data or simulation services to third parties under strict privacy safeguards [4]. Renewable developers, storage operators, and energy communities can interrogate the twin via APIs [51] to test project viability, size investments, and negotiate grid-service contracts, thereby lowering transaction costs and accelerating deployment [20]. At the transmission level, sharing a live model across borders supports dynamic capacity allocation and flow-based market coupling, increasing trade, narrowing regional price spreads, and raising overall social welfare [16].

Consumers, too, stand to benefit. With granular visibility of network constraints, operators can introduce time-varying tariffs or incentive schemes that reward households and businesses for shifting consumption when it most eases grid stress [52]. Smart-home platforms can translate these signals into automated device scheduling, turning flexibility into a revenue source and deepening public engagement with the energy transition [53]. Visualizations derived from the twin can further demystify grid operations, strengthening community support for network projects and expediting permitting processes that currently delay expansion [25].

The twin also offers an economic “insurance” function. By simulating extreme events, like storms, cyberattacks, or equipment failures, it can guide investments in resilience strategies whose avoided-blackout value runs into billions of euros [20]. Regulators are already exploring remuneration mechanisms for demonstrable resilience improvements, suggesting an emerging market for risk-mitigation services grounded in twin analytics [16].

Macro-economically, the twin contributes to lower wholesale prices through better utilization of low-marginal-cost renewables, reduces import dependency by maximizing domestic generation, and supports climate objectives by cutting curtailment and associated CO₂ emissions [2]. While digitalization inevitably disrupts incumbents by enabling new entrants, technology firms offering turnkey energy-management packages. For instance, early engagement allows existing utilities to position themselves as platform providers rather than lose ground to competitors [25]. The net effect is a dynamic, data-rich marketplace in which efficiency gains, customer choice, and decarbonization progress hand in hand, reinforcing the economic case for investing in a European grid digital twin [16,17].

5.4. Investment Models and Incentives for the Digital Twin

Mobilizing the capital needed to realize a pan-European grid digital twin depends on combining public funding, coordinated utility investment, and incentive-based regulation in a manner that aligns costs and benefits across all stakeholders [16,54]. Funding at the European Union level is a logical foundation. Horizon Europe’s initial allocation of twenty-five million euros to the TwinEU project provides a model that could be expanded through mechanisms such as the Connecting Europe Facility, the Digital Europe Program, the Innovation Fund, national Recovery and Resilience plans, or financial instruments offered by the European Investment Bank [11]. Positioning the digital twin as essential cross-border infrastructure, comparable to physical interconnectors, would justify such support and help to minimize the tariff impact on consumers [55].

Cost sharing among network operators constitutes a complementary foundation. Under the coordination of ENTSO-E and the EU DSO Entity, transmission and distribution system operators can pool resources to co-develop core components of the digital twin platform. This approach enables economies of scale and helps to avoid duplication through separate national initiatives [4]. Establishing fair cost allocation rules will be essential. These rules may be based on factors such as system size, load served, or quantified benefits. In addition, solidarity mechanisms will be necessary to ensure that smaller distribution operators are not excluded from participation due to financial constraints [23].

Regulatory design must reward rather than penalize digital investments. Converting software and data platforms into capitalizable assets, adopting TOTEX-based remuneration, or granting innovation allowances would let operators recoup spending on sensors, communications, and cloud infrastructure just as they do for lines and transformers [16]. Output-based incentives go further, letting utilities retain a share of the savings when the twin demonstrably cuts redispatch costs, improves reliability indices, or unlocks additional cross-border transfer capacity [23]. Such mechanisms transform the twin from a compliance requirement into a profit-aligned performance tool [24].

Public–private partnerships can inject additional capital and expertise. Cloud providers, cybersecurity specialists, and analytics vendors may co-finance infrastructure in return for long-term service contracts or usage-based fees, provided governance safeguards guarantee data sovereignty, open interfaces, and non-discriminatory access [25]. Structured correctly, PPPs accelerate deployment while ensuring public control over strategic assets [16].

Staged roll-out reduces risk and builds momentum. Early pilots that verify congestion-cost reductions or capacity-deferral savings create tangible evidence for regulators, investors, and politicians, de-risking successive investment tranches [5]. Quantifying the opportunity cost of inaction, overbuild, renewable curtailment, and delayed customer connections further strengthens the case for timely funding, as the twin’s price tag is modest relative to the hundreds of billions Europe must invest in physical networks this decade [2].

Taken together, a layered financing strategy that combines European Union grants and loans, cooperative investment by utilities, regulatory incentives linked to performance, selective participation from public–private partnerships, and phased investment based on demonstrable benefits offers a credible pathway to full-scale deployment. When compared with the capital expenditure required for conventional grid reinforcements, the associated operational savings, and the wider economic stimulus, the digital twin should be regarded not as an optional information technology enhancement but as a high-return, system-wide investment in Europe’s energy transition.

5.5. Addressing the Opportunities

Realizing the identified economic potential requires a coordinated realignment of regulatory models, investment incentives, and market structures. A fundamental step involves regulatory recognition of operational expenditures for digital infrastructure as investment equivalents. The adoption of TOTEX-based remuneration schemes and innovation allowances is essential to eliminate disincentives for deploying advanced digital technologies, including analytics platforms, sensor networks, and cybersecurity systems. By acknowledging the deferred capital expenditure value of avoided grid reinforcements, regulatory authorities can enable cost recovery mechanisms that accommodate software licenses, cloud services, and platform integration as legitimate grid investments. Furthermore, the introduction of performance-based incentives tied to measurable outcomes such as reductions in redispatch costs, improvements in reliability metrics including SAIDI and SAIFI, or increased hosting capacity for distributed energy resources can reinforce the strategic integration of digital twin solutions into the operational frameworks of system operators.

In parallel, the establishment of harmonized cost-sharing methodologies across borders is indispensable to prevent asymmetrical burdens where one national regulator underwrites expenditures for benefits that materialize predominantly in neighboring systems. Such methodologies should be based on transparent criteria, including proportional system size and estimations of cross-border operational gains.

To accelerate adoption, it is equally important to cultivate public–private partnerships and pooled investment mechanisms. These structures reduce entry barriers for small and medium-sized distribution system operators and foster collaborative development of shared assets such as federated data lakes, standardized interface frameworks, and coordinated cybersecurity monitoring. EU-level instruments, including Horizon Europe, the Digital Europe Program, and the Connecting Europe Facility, should prioritize funding for initiatives that embody open and modular architectures and conform to common standards such as the Common Information Model and the Common Grid Model Exchange Specification. Grant conditions should mandate the publication of non-proprietary interface specifications to ensure interoperability and avoid vendor lock-in.

The deployment of early-stage demonstrators that quantify economic and operational benefits, such as deferred grid upgrades and enhanced congestion management, can provide empirical evidence to support regulatory endorsement and mitigate investment risks. Embedding digital twin functionalities within existing flexibility markets, including local demand response auctions and distributed energy aggregation schemes, can further strengthen the business case by enabling new value streams for prosumers and aggregators. These mechanisms collectively reinforce the economic viability and scalability of a pan-European grid digital twin.

To synthesize the key economic dimensions of the digital twin,

Table 3. Summary of economic opportunities, justifications, and investment strategies for the grid digital twin.

Area	Key Benefits	Economic Arguments	Implementation Strategies
Grid Optimization	Asset deferral and reduced curtailment	Unlocks significant CAPEX savings	Digital monitoring and predictive analytics
Cost–Benefit	Positive B/C ratios in pilots	Benefits outweigh upfront costs	Dynamic CBA models and Horizon Europe funding
New Services	Flexibility markets, APIs, and DER integration	Opens new revenue models	Platform economy for grid services
Investment Models	Blended finance, PPPs, and regulatory innovation	Supports wide rollout and equity	TOTEX incentives and solidarity mechanisms
Market Stimulation	High-tech industry growth	Exports and job creation	Support startups via EIC and open interfaces

compiles the principal opportunities identified in the literature, the corresponding economic rationales, and the authors’ recommended implementation strategies. The table reflects how targeted financial models and market designs can unlock substantial system-level benefits and support the long-term viability of the digital twin initiative.

6. Conclusions and Outlook

The development of a digital twin for the European electricity grid represents one of the most strategic and technically ambitious components of the EU’s dual transition, it is uniting digital innovation with deep decarbonization. This review has outlined the regulatory, technological, and economic dimensions of this undertaking, showing that while the barriers are complex and multi-faceted, they are being actively addressed through aligned policies, pilot projects, and stakeholder collaboration. The opportunities the digital twin presents, for improving efficiency, reducing costs, enhancing reliability, and enabling a flexible, decarbonized grid, are both compelling and increasingly tangible.

Regulatory evolution is central to unlocking the digital twin’s full potential. The challenges of cross-border data governance, cybersecurity, and outdated incentive structures are now widely recognized, and the groundwork for reform is being laid. The forthcoming European Energy Data Space, along with the implementation of NIS2, updated network codes, and CEER’s work on smart grid indicators, indicate that the regulatory environment is adapting to the requirements of real-time and data-centric grid operations. The successful coordination between ENTSO-E and the EU DSO Entity on digital twin use cases and roadmaps further demonstrates institutional commitment to moving beyond fragmented regulatory regimes and toward a harmonized digital infrastructure for electricity networks.

Technological feasibility is increasingly within reach. Rather than a centralized monolith, the European grid twin is likely to emerge as a federated system of interoperable digital twins operated by TSOs and DSOs, linked through standardized data models and real-time interfaces. This approach not only reduces duplication but also enhances resilience and scalability. Technological challenges, including interoperability, data quality, computing performance, and cybersecurity, are being addressed through initiatives like TwinEU, Destination Earth, and investments in cloud–edge architectures and AI-enhanced analytics. By the end of this decade, it is realistic to expect a functional, multi-layered digital twin architecture integrated into daily grid planning, monitoring, and operational workflows across Europe.

From an economic perspective, the rationale for a digital twin is strong and continues to strengthen. Although the initial costs for infrastructure and system integration may reach into the low billions, this represents a modest expenditure when compared to the hundreds of billions required for traditional grid reinforcement. A well-executed digital twin can help to reduce or postpone those larger investments while supporting more precise and economically efficient planning decisions. It can also improve grid operations, lower system losses, reduce the duration of outages, and facilitate the integration of renewable energy sources. These outcomes contribute to reduced overall system costs and, in time, to lower prices for consumers. In addition, the digital twin creates new economic opportunities by supporting the development of flexibility markets, stimulating innovation in energy software, and offering a competitive export platform for Europe’s digital energy technologies.

The broader significance of the grid twin is not just operational, but systemic. It exemplifies the kind of transnational, cross-sectoral digital infrastructure that will underpin Europe’s future energy and climate policy. As it matures, the grid twin could interconnect with other digital twins in climate, urban planning, and mobility, thereby laying the foundation for truly integrated modeling of Europe’s complex socio-technical systems. This positions Europe not only as a pioneer in digitalizing its own energy transition, but as a global leader in the governance and deployment of energy system digital twins.

For European citizens and businesses, the digital twin’s presence may be invisible, but its effects will be palpable. It will enable faster integration of clean energy, more reliable power supply, quicker grid connections, and more cost-effective investment decisions. It will also reduce Europe’s exposure to fossil fuel volatility and support the creation of a digitally enabled energy workforce. Importantly, the digital twin encapsulates the EU’s ethos: leveraging shared knowledge and technical cooperation to build public goods that transcend national borders.

To enhance the accessibility of key insights,

Table 4. Conceptual mapping of regulatory, technological, and economic barriers to proposed solutions for the EU grid digital twin.

Dimension	Identified Barrier	Proposed Solution
Regulatory	Fragmented data governance	CEEDS, GDPR alignment, and Data Act
Regulatory	Lack of interoperability mandates	Binding Implementing Acts and updated grid codes
Technological	System interoperability and data integration	Common Information Model (CIM) and open APIs
Technological	ICT infrastructure and cybersecurity gaps	Cloud–edge hybrid architecture and NIS2 compliance
Economic	CAPEX–OPEX misalignment	TOTEX models and innovation allowances
Economic	No cross-border cost allocation mechanism	Harmonized EU-wide cost-sharing frameworks

provides a conceptual mapping of the main regulatory, technological, and economic barriers identified in this review, alongside the proposed policy and technical solutions. This conceptual mapping aims to support readers in navigating the complex interdependencies shaping the development of a federated EU-wide grid digital twin.

Currently, the European grid digital twin is moving from aspiration to reality. Policy frameworks have been defined, pilot projects are demonstrating feasibility, and institutional momentum is building. The years ahead will determine how effectively this vision is scaled, regulated, and integrated. Success will depend not only on technical excellence but on continued collaboration between regulators, network operators, industry, and researchers. If that collaboration continues and expands, the digital twin will become a foundational layer of Europe’s future electricity infrastructure; a living, adaptive digital system that enhances the physical grid’s performance, resilience, and sustainability. This transformation, grounded in a combination of political will, technological innovation, and collective governance, stands to deliver profound long-term benefits for Europe’s energy system and society.