The European Investment Bank (EIB) has pledged €1.6 billion (~$1.84 billion) to finance the construction of the Bay of Biscay electricity interconnection between France and Spain.

This financing will be completed as loans to the Spanish Red Eléctrica and the French RTE Réseau de transport d’électricité transmission-system operators.

The first loan tranche of €1.2 billion (~$1.38 billion) was signed at EIB’s headquarters in Luxembourg. This loan adds to the co-funding of €578 million (~$665.15) for the project under the Connecting Europe Facility.

The project is covered under the ‘Project of Common Interest’ initiative, which includes participation from the EIB, the European Commission, Red Eléctrica, and RTE. The initiative aims to strengthen cross-border electricity interconnections and the overall European energy system.

Inelfe, a joint venture between RTE and Red Eléctrica, is constructing the Bay of Biscay link. It is expected to become operational by 2028. The link is projected to increase the electricity exchange capacity between France and Spain to 5,000 MW, nearly doubling from the current 2,800 MW capacity.

The link will transmit electricity over 400 km between Cubnezais in France and Gatika in Spain. Of the total length, 300 km of the transmission link will be underwater, making it the first submarine electricity interconnection between the two countries.

EIB stated that the project will contribute to the Iberian Peninsula’s progress towards the European Union target of 15% installed production capacity by 2030 for its member states.

Apart from the Bay of Biscay link, the underground link between Baixas in France and Santa Llogaia in Spain, as well as the improvement of the Argia (France)-Hernani (Spain) link, will help enhance the Iberian Peninsula’s interconnection capacity with the rest of Europe.

Last year, a report by energy think tank EMBER Climate highlighted that many European national grid plans underestimate the potential of wind and solar deployment, posing a significant risk to the seamless integration of renewable energy sources.

In 2023, Europe’s power industry called for an 84% annual increase in investments in aging grid infrastructure over the next 27 years until 2050. The industry stated that the grid infrastructure was ill-suited for accommodating decentralized renewables, electric vehicles and smart grids.