In 2025, the European Commission is expected to put forward an Action Plan for Affordable Energy to support industries and households through the energy transition. To ensure EU industry competitiveness and affordable electricity to all Europeans, we also need to guarantee that Europe remains investible. Within this background, Eurelectric provides several elements for consideration in the Action Plan.
Importantly, electrification will be a driving force behind a competitive Europe. We consider decarbonisation and electrification the most efficient and cost-effective path forward. In a net-zero scenario, direct electrification delivers three- to fivefold energy-efficiency improvements for end users, alongside the decarbonisation benefits of a renewable and clean[1] energy mix.
For example, shifting from internal combustion engine (ICE) vehicles to electric vehicles (EVs) reduces energy consumption for private transportation by a factor of three. Similarly, replacing gas boilers with heat pumps can cut household energy use for space heating by a factor of three to five. These efficiency gains are essential in reducing overall energy demand, which, combined with high electrification, can lower the average EU household energy bill by 45% across all energy sources by 2050.[2]
To ensure its benefits reach all consumers, we will need to reduce system costs by: boosting electricity demand; efficient use of existing fossil-free generation capacity while phasing-out fossil fuel usage; increasing flexible capacity in the system and promoting flexible consumption; as well as expanding the electricity grid, renewable and clean electricity generation. Stable and consistent electricity market design (EMD) rules and a fair treatment of electricity in terms of taxation compared to fossil fuels are a prerequisite to make this happen. Cross-border energy exchange in the EU’s internal energy market will allow for efficient allocation, and therefore, is a no regret option. Encouragingly, the Draghi report has addressed these points.
Nevertheless, we caution interventions regarding energy markets. The power sector is acutely aware of the challenges posed by high energy costs, and we are working together with industry and households in ongoing stakeholder dialogues to address it. However, some ideas – including certain recommendations in the Draghi report – could have the opposite of the intended effect by distorting market dynamics, increasing system costs and ultimately eroding investor confidence at a time when their capital is crucially needed.
[1] Clean to be understood as renewable, low-carbon, decarbonised electricity generation technologies included in article 4 of the Net-Zero Industry Act
[2] Source: Eurelectric’s Grids4Speed 2024 – slides 53-54, available here.