Energy efficiency, energy savings and electrification go hand in hand. Electrification can lead to improved energy efficiency through the replacement of fossil gas boilers with renewables-powered heat pumps heat pumps, where gas is being inefficiency burnt directly within the households. The more energy savings, the less energy needs to be electrified, making the transition to renewable energy faster, cheaper and less material intensive. Implementing energy efficiency measures through building renovations or more efficient appliances or vehicles can significantly reduce fossil fuel consumption, bring energy prices down and enhance competitiveness.
Below is a list of frequently asked questions on electrification and energy efficiency answered by our policy experts at CAN Europe:
What is electrification?
Electrification is the replacement of technologies and processes that use fossil fuels, such as coal, oil, fossil gas, with electrically-powered equivalents. This could mean replacing a gas stove with an induction stove, replacing fossil boilers with heat pumps, a petrol car with an electric vehicle or using electric arc furnaces instead of coal-powered blast furnaces in steelmaking.
However, electrification does not mean getting rid of fossil fuels per se as electricity power production is still dependent on fossil fuels in many countries. The continued use of coal-fired power plants and gas turbines risks high prices and could stall electrification. Electrification needs to be based on renewables. Renewable electricity and renewable heat, together with energy savings can decarbonise the energy system and replace fossil fuels.
What are the benefits of (renewables-based) electrification?
Renewables-based electrification brings a wide range of social, technical and economic benefits for Europe.
First of all, the electricity from renewable energy leads to lower greenhouse gas emissions compared to fossil fuels. These benefits are already materialising, as the EU’s electricity sector was 59% less greenhouse gas emission intensive in 2023 than in 1990, from 2010 onwards this decrease is exclusively due to the transition from fossil fuels to renewable electricity according to the EEA. Based on preliminary data for 2024, more electricity was generated from wind than from natural gas.
Fossil fuels are harmful for human health and cause premature deaths due to poor air quality, renewables-based electrification can on the contrary lead to improved air quality. Reducing the dependence on fossil fuels also enhances energy security and can make the economy less vulnerable to volatile fossil fuel prices. At the same time, significant cost savings on fossil fuel imports can be generated, which can be beneficial for the European economy.
Renewables-based electrification also helps economic growth and the creation of local and green jobs, which secure employment in many sectors, especially associated with manufacturing, technology, installation, maintenance and education. Electrifying homes, especially when coupled with building renovation, can be a major step towards healthier homes and improved indoor air quality. The WIR Inhouser Project in Salzburg, Austria, shows how electrification coupled with renovation can lead to significant indoor air quality change, among other benefits such as better accessibility, lower bills and rent-neutrality. For consumers, renewables-based electrification is also the pathway for more digitalisation and can also offer more flexibility and optimisation in energy use when coupled with demand-side flexibility. With this, people can also benefit from renewables-based electrification in their own lives.
Lastly, electrification can also generate energy savings through increased energy efficiency in household, transport, construction and industry.
Why is energy efficiency important for electrification and vice-versa?
Electrification typically also means energy efficiency gains. Highly efficient industrial processes can offset the disadvantage of higher energy prices by extracting more value from each unit of energy consumed. A heat pump is three to four times more efficient than a gas boiler.
However, not all energy efficiency is electrification and electrification alone will not drive energy savings. For instance, for renewable heating, heat pumps using electricity are just one of the solutions, together with solar thermal, geothermal and district heating networks using renewable sources. If electric technology is not more efficient than the technology based on fossil fuel it replaces, total energy consumption will not be reduced. There is a risk of an electrification-only approach at EU level, which would mean more material and system deployment, higher prices, no reduction of energy poverty, more variability, higher storage and more costs. Therefore, energy efficiency plays an important role in accelerating and lowering the costs of electrification. Overall, the more energy efficiency and energy demand reduction, the less energy needs to be electrified, making the energy transition faster, cheaper, just and less material intensive.
It needs to be ensured that energy efficiency measures, such as building renovation are coupled with electrification and renewable heat in general, which will significantly also reduce fossil fuels consumption and bring energy prices down. Measures for energy efficiency and energy savings across all sectors need to be rolled out and implemented, including within buildings, the public sector and the transport sector. The basis for this is the implementation of the current energy efficiency legislative framework, including the Energy Efficiency Directive, the Energy Performance of Buildings Directive and the Ecodesign regulation.
Won’t electrification increase electricity demand too much?
Indeed, electrification will lead to increased electricity demand and could also lead to a surge in overall energy demand, which is why electrification and energy savings need to go hand in hand. CAN Europe’s Paris Agreement Compatible Energy Scenario shows a direct electrification rate of 69% by 2040 and demonstrates at the same time that the fastest way to increase the electrification rate means lowering the overall energy demand at the same time, leading to halving energy demand by 2040, which helps making the objective easier to reach. This is also why electrification efforts should complement a post-2030 EU energy savings target and electrification needs to help reach and ideally overshoot the current 2030 EU energy efficiency target.
However, it is not as simple. Renewables-based electrification shifts energy use from fossil fuels to electricity, such as using a heat pump instead of a gas boiler, with heat pumps consuming 3-4 times less energy than a gas boiler, taking into account that a few conditions for the installation of the heat pumps are needed, such as an already adequate performance of buildings. Switching from petrol cars to electric vehicles also raises electricity demand, but electric vehicles use about 70-80% less energy per km driven and therefore the total energy use of these technologies is less, because they are more energy efficient. In these cases electrification equals energy efficiency and leads to energy savings.
It is vital that electrification leads to greenhouse gas reductions and not to the growth of unnecessary electricity sinks such as data centres, AI, etc, which would contradict energy demand reduction. As such, in Ireland the increasing number of data centers have led to a rising share of electricity in the past years (from 5% in 2015 to 21% in 2023), which highlights the need for an electrification strategy with energy demand reduction at its core. Another example would be replacing a gas stove with a standard electric resistance stove that may reduce direct fossil fuel fuel use, but are less energy efficient and could consume more energy. Switching to an induction stove, on the contrary, would improve energy efficiency and rather reduce overall energy demand, because induction transfers heat directly with minimal losses.
- The PAC scenario shows a high direct electrification rate, reaching 43% by 2030 and 69% by 2040.
- CAN Europe (2024): The Electrification Action Plan Civil Society Wants to See
- Ember (2024): EU battery storage is ready for its moment in the sun
Why are electrification and energy efficiency currently important at the EU level?
As a reaction to the energy price crises and to reduce dependence on Russian fossil fuels, the European Commission’s REPowerEU plan started to place electrification and energy efficiency and energy savings at its core to replace the equivalent of fossil fuel imports. In this plan (Annex I), the Commission argues that 12 bcm of fossil gas could be saved from energy efficiency and electrification in industry but this would require a higher 13% EU energy efficiency target for 2030.
The Clean Industrial Deal initiatives, including the Affordable Energy Action Plan (AEAP), have continued to make the case for electrification and energy efficiency. The AEAP mentions a future energy system, driven by a substantial scale-up of clean energy and electrification, with energy efficiency at its centre. Unfortunately, the plan fails to recognise the value of achieving the EU’s 2030 EE target and implementing the 2023 Energy Efficiency Directive as contributing to affordable energy prices.
The EU Commission announced in June 2025 a renewed commitment to energy efficiency, centering its work on 10 concrete areas. One of these areas is to mainstream energy efficiency in EU energy policymaking, which includes integrating energy efficiency into the Electrification Strategy.
As one of the deliverables for 2025-2026, the Commission will focus on presenting the Electrification Strategy, and commits to industrial energy efficiency actions helping to reduce overall electricity demand from electrification by 10-20%.
- European Commission (2022): RePowerEU Communication
- European Commission (2025): Action Plan for Affordable Energy
- European Commission (2025): New impetus for energy efficiency
- Regulatory Assistance Project (2024): Right here! Right now!
What is demand-side flexibility and why does it matter?
Power system operators must match supply and demand for electricity at all times to balance the grid. An electricity system based on 100% renewable energy would mean that more flexibility options to match electricity supply and demand are needed. One of these options is demand-side flexibility. Demand-side flexibility means that energy users can adjust their consumption or production of electricity at different periods of the day in response to signals like price changes, grid constraints or renewable energy availability. For example, smart thermostats and Time-of-use tariffs could help households reduce heating and cooling demand during peak hours or an electric vehicle could charge overnight when demand is low.
As the greatest potential source of demand-side flexibility in 2030 is predicted to be household heating, improvement in inefficient and leaky buildings, such as deep building renovations, can help to maintain temperature and therefore allow households to use automated heating control, because the comfort is not compromised.
Demand-side flexibility enables a more efficient energy system and supports the acceleration of renewables-based electrification (through coping with the congestion of the grid and the roll out of renewable energy), while at the same time reducing costs for end-users.
- Regulatory Assistance Project (2024): Right here! Right now!
Is electrification too expensive for households?
Electrification and more specifically electrically-powered technologies often require significant upfront costs compared to technologies fueled by fossil fuels. For example the upfront costs of some heat pumps (not all) can currently still be higher than those of gas boilers. If the user decides to also insulate the building, and/or to replace old radiators with low-temperature ones, or with underfloor heating, or become a flexible consumer able to change their time-of-use vis-a-vis hourly electricity prices, the operation costs (and upfront) costs of a heat pump will be even lower. But that requires additional upfront investments.
Also the operational costs are not to be underestimated, as electricity is three times more expensive than fossil gas in most European countries, which is one of the main reasons why households might not invest into a heat pump. Taxation also affects electricity prices more than gas: current tax rates results in electricity prices being weighed down by taxes and levies about 1.4 times more than fossil gas, which is why the revision of the Energy Taxation Directive is a key opportunity to tax energy products in proportion to the negative externalities they create. It is expected that costs of these technologies will however decrease in future as they become more mature and economies of scale develop. In addition, as long as the installed/used electric technologies are also energy efficient, they will reduce running costs over time. For example, electric vehicles are usually cheaper to run per kilometre than petrol or diesel cars and could lower energy bills in the long run.
Overall, the upfront costs for electrification can be a barrier for low-income and vulnerable households, especially if financing options are limited and if landlords control the choice of heating and other appliances. A Joint Research Centre Study on the heat pump wave, indicates that the high upfront cost for heat pumps risk excluding vulnerable households from the clean energy transition. Therefore, low-income and vulnerable households should receive special support. According to the study, targeted financial support schemes and policy programmes are needed and housing policy intervention is required to tackle the split incentives problem between building owners and tenants.
The long-term solution for energy poor, low-income and vulnerable households with regards to electrification is always the coupling of energy efficiency with electrification measures. This means for example coupling heat pumps and building renovation, as higher efficiencies make the utility bills more affordable. This would call for integrated electrification and renovation programs that also maximise energy savings, with targeted support for energy poor, low-income and vulnerable households.
- Ground-source, water-source and air to-water heat pumps are typically more expensive than gas boilers, however this is not necessarily the case for air-to-air heat pumps.
- CAN Europe (2023): Barriers for renewable heating solutions
- Eurelectric Powerbarometer 2024 https://powerbarometer.eurelectric.org/
- Joint Research Centre (2023): The heat pump wave
What should we ask to be included into the upcoming EU Electrification Action Plan?
- Renewables-based electrification and energy efficiency and energy savings need to go together: The plan needs to help closing the gap towards reaching the EU 2030 energy efficiency target at the minimum, while leading to at least 20% energy savings by 2030 and halving energy demand in 2040. A thorough implementation of the Energy Efficiency Directive and the Energy Performance of Buildings Directive will be paramount towards reaching this target. The electrification of the energy system should under no circumstances lead to a surge in overall energy consumption.
- Prioritize energy efficiency first. The principle is a guiding principle of EU energy policy-making. Energy efficiency needs to be considered as a key resource on par with supply-side options. Energy efficiency can help lower the costs and investments needed and therefore helps electrification. Energy efficiency also offers important benefits for the quality of life and health of citizens, bring down energy bills and help alleviate energy poverty and therefore bring benefits to the people, including the most vulnerable. Multiple benefits of energy efficiency also include job creation, a reduction on reliance on volatile fossil fuel markets and greenhouse gas emissions reduction.
- Ensure that energy poor, low-income and vulnerable households can benefit from renewable-based electrification.Targeted financial support schemes and housing policy interventions to tackle split incentives between tenants and owners, as well as coupling electrification with energy efficiency measures, such as heat pumps with building renovation, are needed.
- Support demand-side flexibility to enable the roll out of renewables-based electrification, such as household heating. Deep building renovation allows households to use automated heating control.
The EU Electrification Action Plan should make the link to the upcoming Heating and Cooling Strategy. The plan should prioritise the connection of buildings with locally available renewable heat sources such as geothermal and solar thermal, the deployment of renewables-powered heat pumps, and decarbonised district heating. Expand and consolidate the integration of the renewable heating & cooling solutions in the context of a holistic transition in the building sector and streamline it across EU and national legislation.
- European Commission (2025): EU-wide assessment of the final updated national energy and climate plans
- CAN Europe (2025): Position on Halving Energy Demand and Reaching 100 % Renewables by 2040
- Coalition for Energy Savings (2024): Energy Efficiency: Enabling, accelerating and lowering the costs of the EU electrification
- Regulatory Assistance Project (2024): Right here, right now.
