Delivering on the EU’s electrification ambitions

Electrification is a key pillar of the EU’s energy security, industrial competitiveness, and climate strategy. Today, imported fuels account for around 60% of the EU’s total energy demand and cost the bloc EUR 380 billion in 2024. The risks associated with the EU’s reliance on fuel imports have been highlighted by recent market disruptions linked to the near-closure of the Strait of Hormuz amid the conflict in the Middle East, bringing renewed attention to the EU’s target of increasing electrification from 24% today to 32% of energy consumption by 2030.1

This commentary is the second in a series examining the case for electrification in the EU. The previous instalment looked at the cost-competitiveness of electric technologies under 2025 price conditions. This commentary explores where new electricity consumption is expected to emerge across end-use sectors in order to reach the 32% target, and some of the challenges and opportunities that come with it.

Over the past decade, electricity demand has grown almost twice as fast as energy demand globally, heralding the arrival of an Age of Electricity. However, the EU’s electrification rate over that period has remained relatively stagnant, and today remains broadly similar to those of advanced economies that are also rich in fossil fuel resources, such as the United States and Australia. By contrast, comparable advanced economies with more limited domestic fossil fuel supplies – notably Japan and Korea – have reached electrification rates well above 30%.

Achieving 32% electrification would increase EU electricity consumption by around 600 Terawatt-hours (TWh), roughly equivalent to the combined annual electricity consumption of France and Spain. This additional demand would be distributed roughly evenly across industry, buildings and transport.

Meeting the 32% economy-wide target would see the electrification rate in industry rise from 32% today to around 40% by 2030. Half of the electricity demand growth could be achieved by electrifying heat in non-energy-intensive industries, the paper industry and the chemicals industry. Taken together, this would displace more than 10 billion cubic metres (bcm) of natural gas and 90,000 barrels per day of oil. To accelerate this process, the European Commission has proposed establishing an Industrial Development Bank to mobilise EUR 100 billion, of which a first EUR 1 billion auction has started. As low- and medium-temperature heat accounts for only around one-third of the EU’s total industrial energy demand, policy support is also emerging for the electrification of higher-temperature processes: 9 of the 15 projects which won funding in the first round of Germany’s Carbon Contracts for Difference Auction aim to use electricity to supply heat at temperatures above 150⁰C.

In buildings, reaching the economy-wide target would see the electrification rate increase to 43%, up from 37% today. Space heating holds the largest electrification potential in the sector, and achieving the 32% target would require annual heat pump sales to nearly triple – reaching levels around twice the previous peak of 29 gigawatts (GW) recorded in 2022. Policy support is creating momentum: the revised Renewable Energy Directive requires that EU countries increase the share of renewables used in heating and cooling by 1.1% each year in 2026-2030, while energy efficiency targets are set out in the Energy Efficiency Directive and the Energy Performance of Buildings Directive. As heat pumps replace traditional heating systems, they would displace almost 25 bcm of natural gas compared to 2024. Further changes to gas and electricity consumption are driven by a rise in retrofit activity and increases in electricity demand stemming from greater use of air-conditioners and expansion of data centres.

In transport, the rate of electrification would need to reach close to 10%, up from around 2% today. Rail would be overtaken by road as the largest electricity consumer in the transport sector. Electric car sales would need to double compared to 2025 levels, and electric medium- and heavy-freight trucks sales would need to increase thirteenfold. Recent growth has been rapid: in 2025, electric car sales increased by nearly 700 000 units, mainly driven by large markets such as Germany. Electric medium- and heavy-freight trucks reached a market share of over 4% in 2025, up from around 2% in 2024. Reaching the electrification target in transport raises electricity demand by around 160 TWh, displacing 1 mb/d of oil demand. EU CO2 standards remain the main policy lever for increasing EV adoption, even after fully accounting for the European Commission’s latest proposal to introduce flexibility in meeting the 2030 standards, and recent developments toward a 90% CO2 emissions reduction target for 2035.

Electrification unlocks substantial savings in energy expenditure. Annual household spending on heating or transport can be reduced by up to 60%, while an average industrial facility can save around EUR 1 million per year. Greater reliance on electrified demand also reduces consumer exposure to volatility in international fuel markets.

For end-use sectors, the path to 32% sees electrification investment double compared to the past five years, reaching an average of around EUR 100 billion annually. Households account for a growing share of these investments and could save around EUR 300 (one-third of the average heating bill) per year on average thanks to greater electrification alongside efficiency improvements. Households that can make the switch to heat pumps and purchase an electric car could save EUR 1 000 on average.

However, most investments in electrification today are made by higher-income households. A key challenge is ensuring that lower-income households and communities are not excluded from the benefits of electrification because of high upfront costs, And social acceptance for electrification depends on whether the benefits are being shared widely. Targeted low-cost auto loans and consumer credit schemes to middle- and low-income households can help overcome such financing barriers. Similarly, in industry, adoption of industrial heat pumps can be supported by dedicated credit lines targeting small- and medium-sized enterprises (SMEs) that may otherwise struggle to access affordable financing. 

Greater electrification of end-uses in the EU will increase ownership of technologies that can consume electricity flexibly, such as residential heat pumps, electric vehicles and smart air conditioners.

Our analysis shows that a typical electrified household (equipped with a heat pump for space and water heating, and an electric vehicle) can save 10 to 15% of its annual electricity bill, depending on climate and usage patterns. These savings are enabled by shifting electricity consumption to periods when prices are lower, leveraging the building’s thermal inertia, the water tank storage capacity or exploiting smart charging opportunities to adjust when electric vehicles are charged. Smart charging operates at half the price of non-flexible charging, while flexible water heating is at least 20% cheaper than its non-flexible counterpart. Meanwhile flexible space heating offers savings of around 10%, depending on the insulation level.

Flexibility not only lowers household bills but also makes electrification more attractive: while electric cars consume around 20% of electricity in a typical household, they contribute to more than half of electricity bill savings, making them more competitive against conventional cars.

These savings can only be realized if households are equipped with smart technologies and if market frameworks – such as time-of-use tariffs or aggregators – enable households to capture the benefits of flexibility. Reliable and widespread charging infrastructure is also essential to facilitate smart charging. The EU is actively developing one of the world’s most extensive EV charging networks to support this transition.

Despite the challenge of increasing electrification rates, it also offers significant benefits for energy security, affordability and resilience. Lower fossil‑fuel consumption would cut gas imports for end‑use sectors by up to 45 bcm and oil imports by around 1.7 million barrels per day, a reduction of roughly 15% for both fuels – delivering savings of about EUR 55 billion per year at 2024 prices. If global energy markets remain squeezed because of continued disruptions to tanker flows through the Strait of Hormuz, savings for the EU could be even higher.