Reliability of European power grid to be monitored, warns DBRS

The agency has issued a statement on the blackout and its consequences for companies in the sector. DBRS expects the investigations to identify the capital upgrades needed to improve grid reliability.

The strong fluctuation that caused the loss of 15 gigawatts of energy and the consequent blackout in Portugal and Spain will not have an impact on the evaluation of European companies in the sector, but the global credit rating agency, Morningstar DBRS, indicated that investment in grid stability will move to the forefront of the analysis.

For European energy companies operating in transmission and distribution, “no material credit impact” is expected, according to DBRS’ assessment. However, this blackout “brings ancillary services for grid stability to the forefront, including frequency regulation and black starts .” DBRS also says that “once a cause is determined, this could lead to new projects to increase grid reliability”.

“We expect these investigations to identify capital upgrades needed to improve grid reliability, which will prompt power system operators to approve more projects to improve grid reliability,” said Adam Provencher, vice president, European Corporate Ratings, Diversified Industries and Energy at Morningstar DBRS.

“While efforts to improve grid stability will likely provide an opportunity for electricity transmission and distribution operators to increase their tariff bases, we believe the benefits will be small compared to their overall investment requirements,” DBRS noted.