THE ENERGY INDUSTRY TIMES - SEPTEMBER 2026
16
Final Word
T
here’s nothing like a crisis to
get things moving. Over the
past 5-10 years, the EU has
made signicant strides in generating
electricity from homegrown energy
sources, but the electrication rate of
energy demand has stalled at 23 per
cent over the past decade. Russia’s
attack on Ukraine, and the US-Israel
war against Iran have served as a
wake-up call for Europe and the need
to accelerate its electrication efforts.
As the July-August issue of TEI
Times went to press, the European
Commission presented an Electri-
cation Action Plan to make Europe
the rst electro-powered continent, as
well as a plan for a stronger carbon
market to support EU industry in the
clean transition and electrication.
With petrol and diesel prices at re-
cord highs since the closure of the
Strait of Hormuz due to the Middle
East conict, and consumers facing
crippling gas bills as a result of the
still ongoing Ukraine war, Europe is
experiencing the impact of relying on
imported fossil fuels in a world ex-
posed to geopolitical shocks.
Launching the Electrication Plan,
Ursula von der Leyen, President of
the European Commission said: “The
best way to reduce Europe’s fossil
energy dependency is to power our
economy with electricity from clean,
homegrown sources. Today we are
proposing to make Europe the world’s
rst electro-powered continent. From
lowering electricity prices to adapting
our carbon market to the changing
global realities, this is also an invest-
ment and independence plan. To keep
the clean transition on track, bring
relief to our industry, and support
decarbonisation. Let’s switch it on.”
The EU has already pledged to raise
its electrication rate to 32 per cent
by 2030. To support the need to ac-
celerate the electrication of ener-
gy-using sectors – notably industry,
transport and buildings – the Com-
mission will now assess, an indicative
target of 46 per cent by 2040 as part
of the post-2030 Energy Union
package. Reaching this goal could cut
the EU’s fossil fuel import bill by
€260 billion per year by 2040, said
the Commission, bringing “substan-
tial benets for the EU economy,
businesses and citizens in terms of
lower energy prices and competitive-
ness, stronger energy security and
resilience”. It added in a press release:
“To help European manufacturers
benet and lead industrial decarboni-
sation and electrication efforts – to
make the switch – we need investment
at scale.”
The EU will keep its Emissions
Trading System (ETS) at the heart of
its decarbonisation drive. Since its
launch in 2005, the ETS has generat-
ed more than €270 billion in revenues
that were reinvested in innovation,
industrial decarbonisation and the
modernisation of Europe’s energy
system – all the while helping Europe
cut emissions by 50 per cent in the
sectors it covers. This market-based
system ensures predictability across
all EU countries.
However, the geopolitical and
economic context has changed, and
EU industry is under increased
pressure. “While we continue our
work on climate action, we have to
modernise our main decarbonisation
policy – the EU ETS – to be our in-
novation and investment engine for
our competitiveness and indepen-
dence – in line with the European
Council June 2026 conclusions and
the Clean Industrial Deal,” the Com-
mission said.
According to the Commission, the
ETS Review will bring relief to in-
dustry, while preserving the essential
role of the ETS in the climate and
energy transition, in line with the EU
Climate Law. It updates the Linear
Reduction Factor (LRF) of 3.7 per
cent for 2031-2035 and 1.7 per cent
for 2036-2040, making the trajectory
more gradual and aligned with do-
mestic climate ambition level. Up to
2 per cent high-quality international
credits will allow the nance of de-
carbonisation projects abroad and
provide breathing space in 2036-2040
when the emission reduction in Eu-
rope will become more challenging.
The revised ETS will have a strong
focus on investments. The Industrial
Decarbonisation Bank will have €100
billion funding going towards indus-
trial decarbonisation across Europe at
scale. The ETS Investment Booster
will be available before 2030 as the
rst phase of the Bank. The EU ETS
Innovation Fund will continue to
support rst commercial applications
of innovative clean technologies in a
wide range of sectors. And Member
States will be required to spend 50
per cent of their national ETS reve-
nues on investments to decarbonise
ETS sectors. This adds up to more
than €100 billion in investments be-
fore 2030.
It is comforting to see that decar-
bonisation remains core to the EU’s
energy transition but with energy
security brought into sharp focus
since Russia’s invasion of Ukraine in
2022, most eyes are squarely focused
on the electrication plan.
The benets of electrication for
European consumers are clear: driv-
ing a battery-electric vehicle can save
up to 78 per cent compared to an
equivalent fossil-fuelled car. Switch-
ing from gas boilers to heat pumps
cuts the average EU household’s
heating bill by up to 60 per cent, while
providing important co-benets for
climate adaptation. However, barriers
to widespread adoption remain.
Electricity often costs three times
more than gas. Grid connections can
take years. Too many innovative
technologies never reach commercial
scale. Companies have too little in-
centive to make the switch from
fossil fuels to electricity. The Electri-
cation Action Plan aims to address
all these barriers.
The Plan focuses on reducing the
price gap between electricity and
fossil energy costs and on incentivis-
ing the uptake of cleaner, electrici-
ty-based technologies such as heat
pumps, electric vehicles and batteries,
among others, across Europe.
Jozeen Vanbecelaere, Policy Di-
rector at the European Heat Pump
Association, said: “This Electrica-
tion Action Plan is a game-changer.
For the rst time it focuses on
boosting electrication of demand –
and does so via a great line-up of
measures, from tackling energy tax-
ation and electricity prices and tap-
ping on heat pumps’ exibility, to
supporting industrial electrication
and waste heat recovery.
“To ensure it delivers, the European
Commission must swiftly convert it
into legislation and measures to enact
at national level. EU governments
should then pull together on imple-
mentation in order to score greater
energy security, electrication and
lower bills.”
One of the most signicant commit-
ments is the proposal to improve the
electricity-to-gas price ratio by re-
ducing national ratios to a maximum
of 2.5 for households and 2.0 for in-
dustry by 2030. The plan states that
Member States should not tax elec-
tricity more than gas – currently in
many countries, electricity is taxed
multiple times more than gas.
To tackle this, the proposal to fu-
ture-proof electricity bills in the EU
will empower Member States to re-
duce network charges for certain
consumer groups and taxes for ener-
gy-intensive businesses. It also spurs
faster deployment of smart meters,
which will make it easier for consum-
ers to save on their energy bills.
The Action Plan also proposes
solutions to lowering the upfront
costs of electrication technologies
across key demand sectors such as
buildings, transport and industry. It
sets out a wide variety of tools that
can be mobilised, such as the use of
social leasing schemes, ETS nancial
instruments, including the Social
Climate Fund and the Industrial De-
carbonisation Bank, and a Clean Heat
Market mechanism.
To enable electrication, the Com-
mission, importantly, stressed the
need to speed up grid deployment.
Although Europe’s electricity grids
are among the largest and most reli-
able in the world, there are long
waiting times for new connections,
and the existing grid is not being used
as efciently as it could be.
“The Grids Package proposed last
year addresses these challenges, and
its swift adoption by the co-legislators
by the end of the year will be key for
Europe to speed up electrication,”
said the Commission.
The Plan addresses other barriers,
including the slow uptake of innova-
tive electrication solutions by pro-
moting the development of viable in-
vestment project and manufacturing
capacity in clean energy technologies.
As the Commission prepared to
roll-out the plan, Fatih Birol, Head of
the International Energy Agency said
Europe had made a “major mistake”
by failing to wean its economy off
imported fossil fuels quickly enough
since the 2022 energy crunch.
Now it has a plan. The next, and
much more difcult, task is convert-
ing it into concrete deployment
measures. Even the best laid plans…
Sounds like a plan…
Junior Isles
Cartoon by Jem Soar
