Why political volatility is now the biggest growth barrier for Southern Europe’s energy sector

Energy investment in Southern Europe remains active, but growth is increasingly shaped by external uncertainty rather than internal constraints. Political volatility and regulatory complexity are now playing defining roles in how projects are planned, financed, and delivered.

Across Southern Europe, energy leaders are navigating a period of heightened uncertainty. While the region continues to invest in electrification, renewables, and energy security, the factors shaping growth have shifted. Today, external forces – particularly political volatility and regulatory complexity – are emerging as the most significant constraints on progress, overtaking the internal challenges that historically dominated decision-making.

Insights from DNV’s Energy Industry Insights 2026 report show that political and regulatory dynamics are not only influencing strategic direction, but also directly affecting how and when projects are delivered.

Regulatory complexity is reshaping project timelines

Energy projects have always been long-term, capital-intensive undertakings. In Southern Europe, however, uncertainty is increasingly linked to the policy and regulatory environment surrounding project approval and execution.

Permitting processes remain a central challenge, with 27% of respondents from Southern Europe citing permits for new projects as one of the leading barriers to growth. Multiple layers of national and regional regulation, combined with evolving policy priorities, can introduce delays at several stages of development. Even when policy ambition is clear – for example in accelerating renewables or strengthening energy security – implementation pathways are not always aligned. As a result, 70% of global renewables respondents say permitting delays more than any other factor are slowing the expansion of renewables.

Political volatility adds another layer of complexity. Among global renewables respondents, 78% say policy reversals are the biggest threat to the viability of new renewables developments. Shifts in government priorities, changes in regulatory interpretation, or evolving subsidy frameworks can alter project viability after initial investment decisions have been made. This creates uncertainty for developers, investors, and supply chain partners, extending timelines and increasing perceived risk.

As a result, project delivery is becoming less predictable. In practice, this means that energy leaders must plan not only for technical and financial challenges, but also for potential regulatory changes throughout a project’s lifecycle.

A shift from internal to external barriers

Traditionally, barriers to growth in the energy sector have been largely internal – access to capital, technological readiness, and organizational capability. These factors remain important, but they are increasingly being overshadowed by external constraints.

The survey indicates that, in Southern Europe, energy leaders now identify political volatility (41%) and regulatory complexity (28%) as more significant barriers than internal or sector-specific limitations.

This shift reflects a maturing industry. Many organizations now have the technical expertise and access to capital required to deliver large-scale projects. Renewable technologies such as solar PV have reached high levels of maturity, and supply chains are better established than in previous years.

However, as internal capabilities strengthen, external conditions become key constraints for growth. The pace at which projects can be approved, financed, and connected to the grid is increasingly shaped by policy consistency, regulatory clarity, and institutional efficiency.

In this context, the ability to manage regulatory risk has become as important as technical execution.

Implications for investment decisions in 2026 and beyond

For investors and project developers, the growing importance of political and regulatory factors is shaping how capital is allocated and how opportunities are assessed.

First, there is a stronger focus on risk-adjusted returns. Projects are no longer evaluated solely on expected output or cost efficiency, but increasingly on the stability and predictability of the regulatory environment in which they operate. Markets with clearer permitting processes and more consistent policy frameworks may attract greater investment, even if headline returns appear lower.

Second, flexibility is becoming a strategic priority. Energy leaders are looking to diversify portfolios across technologies and geographies to balance exposure to regulatory risk. This can include combining investments in renewables with infrastructure such as energy storage or grids, which are seen as critical enablers of system resilience.

Third, collaboration is gaining importance. Navigating regulatory complexity often requires close engagement with policymakers, regulators, and local stakeholders. By working together, industry and authorities can help streamline processes, improve transparency, and support more predictable project delivery.

Finally, the findings point to a broader evolution in how the energy transition is being managed. 81% of respondents from Southern Europe say the transition is becoming more pragmatic – balancing ambition with the need for reliability, affordability, and energy security. In this environment, reducing regulatory uncertainty becomes a key enabler of progress.

Supporting a more predictable energy transition

Political volatility and regulatory complexity are not new challenges, but their prominence today reflects the scale and urgency of the transition underway. As Southern Europe accelerates investment in electrification, renewables, and infrastructure, the effectiveness of policy and regulatory systems will play a defining role in determining outcomes.

For energy leaders, this means integrating regulatory awareness into every stage of planning and execution. For policymakers, it highlights the importance of clear, stable, and coordinated frameworks that can support long-term investment.

Together, these efforts can help create the conditions for a more predictable and resilient energy system – one that supports both growth and the transition to a cleaner energy future.