The EU’s Electrification Action Plan can be a catalyst for Europe to achieve an affordable, secure and sustainable energy supply, but it needs to be smart and fair.
We are already seeing the footprints of Electrification across our homes, businesses and roads. Electric vehicles, heat pumps, smart meters and battery storage are rapidly becoming common features across all sectors of the economy and society. Its potential to deliver an affordable, sustainable and secure supply for Europe can never be matched by depending on fossil fuels. But electrification is a means, not an end. It alone is not enough to deliver on the EU’s energy and climate objectives.
The Electrification rate in Europe has stagnated since 2015. While the increase of renewable power has been significant in the last decade to decarbonise the electricity we use, we have not been increasing our total share of electricity consumption across all sectors currently reliant on non-electricity fossil fuels, such as burning fossil gas directly.
The Electrification Action Plan looks to correct this, by taking advantage of the significant growth of renewable electricity being produced over the last four years through increasing electricity consumption across all sectors. However, as electrification has stagnated, there is now a risk that some countries may pivot back to gas as demand electrifies.
Smart electrification can prevent this, by going hand in hand with accelerating the deployment of renewable energy, increasing energy savings and efficiency and implementing a full fossil-fuel phase out. This is essential for keeping electricity growth in check, lowering overall energy demand and ensuring that electricity demand is fully met by renewable energy, rapidly decarbonising the EU’s energy system and reducing dependency on fossil fuel imports.
Europe is already seeing the benefits of more renewable electricity being generated, especially in the wake of the current energy crisis. As conflict in Iran disrupted global oil and gas supplies going through the Strait of Hormuz, the gas price volatility from this disruption added roughly EUR 13 billion to the EU’s wholesale electricity bill, and this could have been much higher. Fortunately, renewable electricity accounted for around 44% of EU generation, which the EEA estimates has saved the EU approximately €29 billion. Moreover, the EEA estimates getting renewables to 68% of EU generation by 2030 could prevent a 125% rise in wholesale electricity prices.
To fulfill its potential, electrification needs to form part of a smart and resilient energy system, ensuring renewable electricity can flow where and when it is needed. Achieving this will require scaling up investment in modernising grid networks and relying on an array of flexible options and technology such as energy storage, interconnectors and smart meters for demand-side flexibility.
Doing so will unleash cheap and clean renewable energy that is being curtailed and wasted due to grid congestion and supply it to regions where it is most needed. It will also divert energy consumption during hours of peak energy demand to times of lower demand, reducing the need for fossil back-up generation and integrating growing shares of renewable electricity.
This ensures that electrification delivers real benefits, lowering energy bills, reducing emissions and allowing Europe to use its rapidly growing energy from wind and solar for a more secure, reliable and sustainable supply.
Delivering this requires a strong and coherent policy framework at EU level. An EU electrification target should be supported by robust monitoring indicators that track progress across sectors and the deployment of key technologies, including heat pumps, electric vehicles and efficient electric appliances. It must also reinforce ambitious and binding renewable energy and energy efficiency targets, and a clear pathway to phase out fossil fuels and fossil fuel subsidies, and be backed by the policies and investments needed for implementation.
Keeping within the principles of a just and fair transition, responding to people’s needs, particularly the most vulnerable, should be more than just a footnote within the Electrification Action Plan. This is an unmissable opportunity to lower the costs of the energy system and respond to peoples’ needs by tackling the cost of living crisis. This starts with targeted support measures and mechanisms that address social inequalities and tackle energy poverty such as grants or low-interest loans that allow low-income households adopt renewable-electricity based technologies without the financial burden. This will help extend the benefits of electrification beyond affluent households and deliver them to the people most in need.
Running in parallel with this is the incentive structure. Across most of Europe, it is fossil gas setting the price of electricity. When gas supplies become disrupted, this spikes the price of electricity for households and businesses, as made evident by the current energy price crisis. For more people to make the transition from fossil fuels to electricity based technologies, it needs to make sense financially among other considerations.
Tackling the tax discrepancy between electricity and gas still in place in many countries. Electricity often carries a heavier tax burden than fossil fuels, because of higher excise duties and multiple levies that are disproportionately placed on electricity bills. Correcting this imbalanced tax structure can make electricity cheaper than fossil fuels by shifting tax from electricity to gas, incentivising people to make the switch.
As more renewable energy comes online, countries can begin to decouple electricity prices from significantly higher gas prices. Spain has been able to experience the real benefit of this, as it has been able to shield its electricity consumers from the latest fossil fuel shock through investing heavily in renewables and decoupling gas and electricity prices.
For the world’s fastest-warming continent which finds itself embroiled in another energy crisis, accelerating the transition to a 100% renewable, fossil-free and climate-neutral future has never been more urgent. Electrification will be an important vehicle needed to achieve this. Done in a smart and fair manner, it can ensure an affordable, secure and sustainable energy supply, which is an economic necessity and a climate imperative for Europe.
ENDS