The EU's New Plan to Electrify Europe

The European Commission has unveiled a new electrification action plan designed to transform Europe into what it calls an "electro continent." Electrification refers to the shift from direct fuel consumption (burning fossil fuels for transport and heating) toward electricity consumption. This process is central to the energy transition, which has two components: decarbonizing the electricity supply through renewables and electrifying the economy by replacing petrol cars with electric vehicles and gas boilers with heat pumps.

The EU has made significant progress on decarbonizing its electricity supply—renewables generated roughly half of EU electricity in the previous year, with wind and solar overtaking fossil fuels for the first time. However, progress on electrifying the broader economy has been less impressive, with electricity accounting for only about 23% of total energy consumption, barely increasing in recent years.

The European Commission's action plan aims to double the electrification rate to 46% by 2040. The plan has two key policy components. First, it seeks to dramatically increase investment in electrification infrastructure through permitting reform to expedite building, direct public funding, and financial instruments to mobilize private sector investment. Second, the Commission wants to redistribute investment costs over longer timeframes to avoid sudden bill spikes that could erode public support, and to make electricity cheaper than or competitive with gas by ensuring it isn't taxed more heavily than gas in member states.

If successful, the plan could reduce EU CO2 emissions by over 2,000 megatons (more than 50% of current emissions), cut fossil fuel import bills by 260 billion euros annually, and improve industrial competitiveness by lowering energy costs. However, achieving the 46% target faces substantial challenges. Historically, the electrification rate rose only 4 percentage points over 15 years (from 19% to 23%), while reaching 46% would require a 23-point increase in the same timeframe—more than five times faster. The further along the electrification path Europe goes, the more difficult the remaining sectors become, such as long-distance travel and industrial processes like steel production. Additionally, because electric technologies are far more energy-efficient than fuel-based alternatives, reaching 46% electrification in sectors like transportation would require approximately 80% of all European cars to be electric. The 46% target is notably not legally binding, and experts suggest that achieving it would likely require yet-unknown technological advances rather than current policy frameworks.