A new ‘Industrial Age’ is emerging – powered by clean electricity. Developed in collaboration with Accenture, this report examines the cost implications of electrifying process heat across three scenarios, and unveils how electrification – with the right measures supporting its key manufacturing sectors – can enhance Europe’s industrial competitiveness.
Electrifying industry is the solution to many of the challenges that Europe is facing today:
- With 20 to 25% of global CO2 emissions coming from industrial activities, industrial electrification is the low hanging fruit in Europe’s decarbonisation plan and has the potential to make a difference in the EU’s path to net zero;
- It offers a path away from dependence on imported fossil fuels that have exposed Europe’s industry to volatile markets and high prices and hampered its productivity;
- And as our study confirms, clean electricity already presents a strong and relevant economic case for industry.
Electrification can ignite a new industrial era – securing Europe’s competitive edge with clean, secure and affordable electricity.
In particular, for most of the industrial activities requiring low or medium temperatures, electrification through mature technologies such as heat pumps and electric boilers are already profitable and deployable at scale.
For high-temperature processes, however, further efforts will be needed to scale up existing technologies – such as e-crackers and electric arc furnaces – and implement the necessary changes to reduce their costs.
To unlock this potential and bring our industrial system to a new level, strengthen Europe’s economy and reinforce its position as a global innovation leader, the right regulations must be put in place. Moreover, businesses, industries and policymakers must work in partnership to support investment in this critical business transformation.
The cost of fossil fuel dependency for Europe’s industry
Europe’s economy remains heavily reliant on imported fossil fuels, a dependency weakening our geopolitical clout and that costed no less than €450Bn in 2024.
The war in Ukraine has revealed the true cost of Europe’s overreliance on fossil fuels imports from Russia, leaving the continent with a hefty bill. And as Russia weaponised its gas supply, industries across Europe were significantly exposed to soaring energy prices.
And the risks extend beyond Russia. New dependencies have emerged – notably with China as our reliance on manufacturing from this region continues to grow. China’s dominance over critical supply chains like raw materials, combined with unpredictable trade wars with the United States and mounting instability in the regional and global world order, are adding layers of uncertainty. These dynamics are prompting many enterprises to transfer their assets outside of the EU.
“Driving this transformation calls for collective action. Only through steadfast collaboration among utilities and ecosystem partners – by aligning bold ambitions, pooling investments, and accelerating the deployment of groundbreaking technologies – can Europe seize this pivotal moment to deliver a lasting boost to its competitiveness.”
Decarbonising our economies is not only a climate imperative, it is a strategic move to regain our energy independence
One thing is clear: decarbonising our economies is not only a climate imperative – it is a strategic move to regain our energy independence through an energy policy that strengthens Europe’s strategic advantage.
3/4
of industrial CO₂ emissions are caused by the combustion of fossil fuels for the production of process heat
€350-450Bn
Cost of fossil fuel imports to the EU in 2023 and 2024
60-90%
of industrial energy demand could be directly electrified by 2035
Drawing from these figures, industrial heat emerges as a prime opportunity for reducing Europe’s emissions. While only 4 % of industrial heat is electrified today, this number could increase to 92% within a 10-year period.
The key to changing this lies in the development of measures that will close the competitiveness gap with fossil-based technologies. In essence, this means addressing the disparity between producing with electric technologies and fossil fuel ones – a gap driven by differences in carbon pricing, taxation or subsidies.
Europe has a unique opportunity to become a global leader in clean technology by developing a business-driven plan that shifts power generation toward low-cost sources – boosting economic competitiveness. The pathway to achieving this will require strong partnerships, smart trade policies, and the development of technologies through targeted investment and cooperation.
“Electrifying Europe’s industrial sectors is essential to unlocking economic opportunities, cutting emissions and strengthening the continent’s role as a global innovation leader. To achieve this, we need targeted industrial strategies that reflect each sector’s unique needs.”
Electrifying industrial heat processes can enhance the competitiveness of the European industry
Our study explores the cost implications of electrification across three distinct industrial activities: ethylene production, milk powder processing, and battery drying – each representing different levels of energy intensity and temperature requirements. These sector archetypes were selected to reflect a broad range of industrial conditions and productivity challenges. For each, two countries were analysed to capture the impact of varying energy mixes. While not fully representative of all European industries, these cases provide relevant insights into the opportunities and obstacles involved.
The results show three main trends.
#1 Electricity is already competitive in the fast-growing clean tech industry
Sweden and Hungary show strong cost advantage for electrified battery cell manufacturing today and by 2030
Battery cell manufacturing costs in Hungary and Sweden: electrification vs. fossil fuel scenarios (2024 and 2030)
The clean tech industry is a leading example of a sector ready for electrification, where the shift towards electric solutions already makes economic sense.
In general, for industries involving low-temperature heat processes – where electrification delivers significant energy efficiency gains (as in battery assembly, where electricity can be up to four times more efficient) – electrification is already economically competitive, and its advantage will only grow over time.
#2 Electrification can be competitive by 2030 for medium heat processes
Electrified milk powder production becomes competitive in both France and Denmark by 2030
Milk powder production in France and Denmark: electrification vs fossil fuel scenarios (2024 and 2030)
Let’s now have a look at another type of industry; where the process temperature requirement is low but is very energy intensive. This is the case for our second archetype: milk powder production. An industry where operating costs make up 90% of total costs for both electric and fossil-based solutions.
Here, reducing energy consumption through electrification and lowering the electricity price has the biggest impact on competitiveness.
In such industries, the competitiveness gap with fossil fuel solutions is relatively small – making it possible to envisage a positive path for electrification by 2030.
#3 More technological progress and innovation in energy-intensive sectors with a high temperature process
Electrification cuts future ethylene production costs in Germany and Spain under best-case scenario
Ethylene production costs in Germany and Spain: electrification vs fossil fuel scenarios (2024 and 2030)
In industrial sectors that require both high temperatures and large volumes of energy -such as chemicals, cement, glass, and iron and steel – further innovation is essential to significantly lower both capital and operating expenditures, and to make electrification a truly competitive option.
As Europe’s power mix becomes cleaner and more affordable, electrifying industrial processes is not only technically feasible – it is increasingly economically viable.
To accelerate the shift from fossil-fuel technologies to electric alternatives, a comprehensive and coordinated approach is needed – one that combines clear regulations, targeted financial measures and strategic planning. Our policy recommendations highlight the need for swift implementation of agreed policies and the removal of harmful fossil subsidies for creating a level playing field. Ensuring regulatory stability and clarity is essential for business confidence and long-term investment in electrification. We also emphasise the importance of developing robust comparison tools and awareness-raising activities to showcase the competitiveness of clean technologies.
Unlocking the full potential of industrial electrification will require supportive financial frameworks, such as the development of an Industrial Decarbonisation Bank and the broader deployment of CCfDs, PPAs and access to capital. These measures must be designed to support long-term contracts and reduce market risk, while aligning with existing and planned EU regulations. Simultaneously, modernising grid infrastructure and streamlining permitting will be critical for supporting the rising demand for electricity and ensure the delivery of electrification projects at scale.
Finally, innovation and technology must be placed at the heart of the transition. From tailor-made industrial strategies to Low- and High-Heat Action Plans and an EU energy storage strategy, targeted support for R&D and partnerships between industrial actors and the power sector will be crucial. Our policy recommendations paper presents relevant, evidence-based proposals that support systemic changes – anchored in data, structured planning and aligned incentives that drive electrification, enhance productivity and ensure a just and competitive transition across all sectors and Member States.
A one-size-fits-all approach won’t work. Industrial consumers are diverse and require tailored electrification pathways. Solutions must reflect differences in temperature needs, capital expenditures capacity, grid access and innovation readiness.
- Promote tailor-made industrial strategies to support innovation and competitiveness
- Offer financial support to reduce CAPEX and OPEX costs
Clean power means competitive power. The more decarbonised the energy mix, the lower the cost of electricity – and the greater the business case for switching from fossil fuels.
- Implement agreed policies, remove of subsidies & access to adequate information on electrification
- Unlock the potential of flexibility, both on supply and demand side
- Upgrade grid infrastructure to support industrial electrification
Long-term contracts create certainty by reducing exposure and impacts of price volatility from short-term markets. PPAs are key to help industrial consumers hedge against these price fluctuations, reducing uncertainty.
- Support long-term contracts for industry
- Generalise Carbon Contracts for Difference (CCfDs) to enhance the bankability of industrial electrification projects and protect the cost-competitiveness of electrification against CO2 and fossil fuels price volatility
How do we move the needle to make industrial electrification a reality?
Business as usual will not do. What we need instead is the development of a comprehensive ecosystem approach.
Achieving the necessary scale of net-zero generation, grids and system flexibility will require close partnerships among all actors. Businesses, industries and policymakers must align their roadmaps to support investment in this critical business transformation. On the technology side, ecosystem collaboration will be key for accelerating development, improve manufacturing efficiency and reduce upfront costs. Finally, sharing data will be essential to support optimisation and enable smarter, AI-driven decision-making. All actors will have to work hand in hand to produce this system shift that will push industrial competitiveness and electrification further: the electricity sector, policymakers and industrial consumers. This will be critical to deliver investment, drive innovation and bring efficiency for all. The moment is now.
