What to think of the Commission’s Action Plan? First of all, it’s good that it’s finally there. A plan that tackles the price, tax and infrastructure barriers head-on is a necessary and overdue step. However, there are some limitations to the plan.
Written By: Eloi Borgne, Junior Policy and Research Officer
The news in Europe has been bleak. Citizens have been witnesses to the raging wildfires in the south of France and in Spain. These terrible scenes, which affect the lives of many ordinary Europeans, illustrate the dramatic impact that climate change will have on the planet in the coming years.
These events also show the ever-growing need to move away from (heavy) fossil fuel use; the main cause of climate change. To be able to do this, we need to ramp up electrification in order to use electricity generated from clean, low-carbon sources instead of fossil fuels. This will not only benefit the climate; it will also make Europe more energy independent and energy secure, lower our energy costs and increase energy efficiency, which will in turn boost Europe’s competitiveness.
That all sounds great, doesn’t it? We are unfortunately nowhere near this ideal scenario yet. The EU still gets over half its energy from imported fossil fuels, with more than €50bn extra spent since the Middle East conflict escalated. Over the past decade, electricity demand has grown almost twice as fast as energy demand globally. Electricity is becoming an increasingly important part of global energy consumption as transport, heating and industry electrify. However, the EU’s electrification rate over this period has remained relatively stagnant and today remains broadly similar to those of advanced economies that are also rich in fossil fuel resources, such as the United States and Australia.
On a more optimistic note: like the firefighters from across Europe that are currently rushing towards the burning forests in France and Spain, the EU often does its best work in moments of crisis. So let this be such a moment to finally make the transition. The past years already signalled a great need for action with the energy shock caused by Russia’s full-scale invasion of Ukraine in 2022 and more recently with the closing of the Strait of Hormuz. It is high time now to deliver.
Thankfully, the European Commission woke up to this and decided to move ahead with Europe’s long-standing electrification agenda. Last week, they unveiled a dedicated Electrification Action Plan. Essentially, the Commission wants to double electrification from 23% to 46% by 2040. This goal is, however, not set as a binding target.
Is the EU Electrification Action Plan doing enough?
So, what to think of the Commission’s Action Plan? First of all, it’s good that it’s finally there. It sets out genuinely ambitious goals: achieving 46 per cent electrification could cut the EU’s gas imports by more than 70 percent and oil imports by more than 40 per cent by 2040, saving up to €260 billion a year on the fossil fuel import bill. Additionally, at a moment when energy security and competitiveness are both under pressure, a plan that tackles the price, tax and infrastructure barriers head-on is a necessary and overdue step.
However, there are some limitations to the plan:
Firstly, the plan’s ambitions run into a physical problem: the grid. None of this electrification happens without a power grid that can carry the extra load, since every heat pump, electric vehicle and electrified factory process, plus new demand from data centres and hydrogen production, has to connect to the system somewhere. ENTSO-E, the association representing Europe’s grid operators, has welcomed the plan for recognising that electrification and grid development need to move together. But its own view of what’s needed goes well beyond pricing: enough investment in grid infrastructure, backed by financing and faster permitting; more flexibility in how the grid is used; and better management of the queues that currently leave new power projects waiting years just to connect. In other words, getting the price of electricity right doesn’t help much if the grid itself doesn’t have the capacity, or the connection process, to keep up.
The plan does give the correct diagnosis
To its credit, the plan is honest about why electrification stalled in the first place. Electrification has been stuck at 23 per cent for a decade, even though over 70 per cent of EU electricity now comes from clean sources. That gap shows the problem was never a shortage of clean power. It was that gas stayed artificially cheap compared to electricity, taxation made that gap worse rather than better, and network charges didn’t reward people for using electricity more efficiently. By targeting those distortions, and promising to phase out fossil fuel subsidies, the plan addresses the actual cause of the stall rather than simply setting a number and hoping the market delivers it. A binding target on top of a market still tilted towards gas would likely have run into the same implementation fights these targets usually do. Fixing the incentives first is the more liberal approach, and probably the more durable one.
The plan should have kept the KPIs
Where this logic runs out is on the supply side. Getting the market right can tell you that people and businesses will use more electricity as gas becomes less attractive. It cannot tell you where that electricity will come from. That’s exactly what the deleted KPI was there to ensure: an earlier leaked draft included a target of adding 100 GW of new renewable capacity every year to 2030, specifically so that the extra electricity being used was actually clean. Without that target, the EU can technically hit 46 per cent electrification in several different ways, including by meeting new demand with gas-fired power plants kept running longer, or with gas-fired electricity imported from outside the EU. In that scenario, hitting the number wouldn’t reduce fossil fuel dependence; it would just move it somewhere else in the system. The KPI wasn’t a bureaucratic add-on: it was the part of the plan making sure “more electrification” actually meant “less fossil fuels”, rather than just a different way of using them.
Two fixes, not a choice between them
None of this means the market-design approach should be dropped in favour of a binding target instead. The point is that market design and a renewables target are not competing options; they are both necessary. A price gap that no longer favours gas is a good start, but on its own it says nothing about what’s actually generating the power at the other end of the wire. The post-2030 Energy Union package is where this gets tested for real, and it’s the moment to argue that closing the price gap and bringing back a clear renewables deployment target are two halves of the same fix, not a choice between them.
Ultimately, the Electrification Action Plan gets the first half of the equation right. Whether it delivers on its promise depends on whether the EU is willing to finish the job: pairing market reform with a real commitment to clean generation, rather than settling for a target that could be met either way.