Europe to get an Electrification Action Plan

Last week, Europe got confirmation that an Electrification Action Plan (EAP) will be presented by the new European Commission . In her mission letter to Energy and Housing Commissioner-designate, Dan J?rgensen , Commission President, Ursula von der Leyen , tasked him with presenting an EAP “to ensure that Europe’s industrial transition towards net zero is powered by an energy system with homegrown, clean electricity”, among other things.

Eurelectric in our own capacity, as well as a member of the Electrification Alliance , has been vehemently advocating for such an action plan since before EU elections. In March this year, we published our own EAP , highlighting the need for measures to address stagnating electrification in the new mandate. This was complimented by the Electrification Alliance’s Recommendations for an Electrification Action Plan which suggests 31 actions across nine categories and three key priorities for the plan.

As of yet, we do not know what the Commission is planning for the foreseen EAP. To pre-empt its launch, we wanted to reiterate the why, what and when; why we need it, what it should include and when it should come out.

Why an EAP?

You might think that the Green Deal had put Europe on a path where electrification rates will naturally increase. This, however, has not been the case. As we have shown in numerous reports, the electrification rate in Europe – that is, the share of final energy demand served by electricity – in Europe has been stagnant at just less than one-quarter for over a decade. That means that while the power sector is working hard to decarbonise electricity generation (74% of electricity was generated with clean sources in the first half of 2024 - 50% renewable and 24% nuclear), the impact is muted by a continued dependence on fossil fuels for a vast majority of energy needs.

The benefits of electrification are clear. Our study, Decarbonisation Speedways , shows that the energy efficiency gains from a 61% direct electrification rate can amount to an absolute decrease of 38-41% of final energy demand in 2050 compared to 2015. This dual impact of reduced demand with a higher share of electricity serving it would also manage to eliminate €309 billion annually of fossil fuel imports compared to 2023, according to scenario 2 of the European Commission’s Impact Assessment of the 2040 Climate Target .

This does not even get into the sustainability, economic, competitiveness and consumer empowerment benefits that would go along with this electrification trajectory. See a non-exhaustive list of those below.

Beyond this, however, there are two beasts of particular importance to the incoming Commission that make the case for an EAP even stronger. Their names are energy security and industrial competitiveness.

The quintessential cases for an EAP

Many of you are likely aware of the hypervigilance on industrial competitiveness and energy security more recently. The reason stems from the knock-on effects of the energy crisis following Russia’s invasion of Ukraine.

Energy security was a clear issue made prominent due to shut-off taps to Russia’s gas fields, resulting in soaring energy prices and very real concern of blackouts in 2022. Industrial competitiveness concerns were a derivative of this, as energy costs reached prohibitive levels for business, leading heavy industrials such as aluminium, zinc and silicon producers to be shuttered at a rate of 35-45%, according to last year’s Power Barometer . At the same time, subsidies for clean technologies in China and the United States have added to industrial woes, making their competitiveness a forefront issue, as illustrated by Mario Draghi’s recent report .

What is clear is that there needs to be an energy sector solution, and we believe this still comes in the form of electrification. This means building up our homegrown sources of clean energy to produce cheap electricity that do not rely on imports from adversarial or downright hostile nations. It means investing in grids to enable the connections and manage the decentralisation of such a clean system. And it means focusing in on flexibility sources such as energy storage, demand response and other novel technologies that can balance an inherently variable system based on heavy renewable penetration.

If we can do that, we can shore up energy security in the EU – absolving us of dependence on these trading partners for energy and regaining control of our energy system to bolster competitiveness. To achieve this, however, we need to make a clear business case for electrification. This means boosting power demand, maintaining a market-friendly investment framework for investors and fix a perverse taxation policy that still favours gas over electricity.

To raise demand, industry has a special role to play. As we will show in our Power Barometer 2024 report being launched next week, energy intensives represent a massive untapped potential for electrification. Contrary to the general (mis)understanding that industrial processes cannot be directly electrified, a recent 麦肯锡 study shows that already 90% of industrial processes can be electrified with different technologies for different temperature ranges.

As key players in the demand for energy, such a poignant shift to electricity would be a critical signal to investors to further invest in cheap sources of generation with an almost guaranteed market to serve. And for industry, the value of a more secure energy system helps hedge against volatile prices, assuring a certain level of competitiveness that cannot be assured in a fossil-based system.

Unfortunately, as mentioned, this transition is not taking place at the rate needed to deliver this competitive bump, nor to meet our decarbonisation targets as a Union. This is where the EAP comes into play and has much to assist on.

What is an EAP?

First of all, with an action plan we are not talking about legislation. Simply put, it is a set of actionable steps to achieve a desired outcome – in this case, electrification. This is important as the need for ramping up electrification is pressing; not just for competitiveness, but to keep pace with already agreed 2030 targets and the expected 2040 ones. The legislative process, on the other hand, can be long and grueling. An EAP is therefore well-suited for the objective we have in mind, as it is swiftly presented and ready for action immediately.

Now for what to include. There are a few key elements that Eurelectric has called for in an EAP that can go a long way in driving electrification forward:

1. An indicative target (non-binding but one to be strived for) of 35% electrification by 2030 in the EU. This will give an interim objective for the electrification rates needed to realise the already set goals from the Green Deal and the likely 2040 target to come in this mandate.
2. Indicators in national energy and climate plans (NECPs) that signal how much progress Member States are making on electrification. This monitoring ability enables policymakers to tailor adjustments needed to continue increasing electrification rates based on different national situations and real-time circumstances.
3. Awareness raising efforts that champion electrification and its benefits demonstrated above. Keeping society on side during the energy transition is crucial to its success as it is society ultimately that makes the decisions that result in a transition. We must therefore ensure that we are doing all we can to make the benefits of the changes we are making as clear as possible, and providing incentive to consumers to undertake the journey with the sector.

Beyond that, above we already mentioned the 31 actions the Electrification Alliance has defined for an EAP. We won’t take the time to spell them all out here, but we encourage you to take a look and support our campaign for an EAP, which has a time element that we will leave you off with here today.

#100DaysToElectrify

The urgent need to electrify should be echoed in the time it takes to come out with an EAP. We are calling for this EAP within the first 100 days of the Commission’s mandate to ensure that we can take quick and decisive action on the challenge. The reasoning on this comes from President von der Leyen’s promise for a Clean Industrial Deal within the first 100 days. This cannot be delivered without electrification, and it therefore must go hand in hand. At the same time, we want to point out the significance of 100 days.

Our President and CEO of E.ON , Leo Birnbaum , mentions how his company will need to make a new grid connection every seven seconds of every working day in Germany between now and 2030 to reach the targets set in the last Commission mandate. We did the maths, and over 100 days, this amounts to 294,000 connections.

In other words, we need to do a lot for every iteration of 100 days across the EU in each Member State. To do so, we need policymakers’ support to make it happen. That means that when the work starts in the Commission this winter, we need them to remember that there are #100DaysToElectrify.

This week's edition written by:

Nicholas A. Steinwand , Policy Communications Advisor - Eurelectric

With technical input by:

Paul Wilczek , Head of Energy Policy, Sustainability and Climate - Eurelectric

and

Eleonora Rinaldi , Press and Media Relations Officer - Eurelectric

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