In the past decade, the European Union (EU) has increased its commitment to clean energy, with investment reaching almost USD 390 billion in 2025. Investment in low-emissions electricity was driven by the global energy crisis that followed Russia’s full-scale invasion of Ukraine in 2022, subsequent favourable policy incentives and the declining cost of renewable technologies. In 2024 renewables generated 50% of electricity used in the EU, while fossil fuels accounted for just over 25% (nearly half what their share was a decade ago), bringing the investment ratio of renewable generation to unabated fossil fuel power to 35:1, from 6:1 ten years ago. Moreover, investment in buildings energy efficiency has nearly doubled over the past decade to USD 100 billion, and the region is a leader in sustainable debt issuance for green buildings.

The 2022 Russian invasion of Ukraine sharply reduced Russian gas exports to the European Union, leading to a supply crisis and driving prices to record high levels. Aside from ramping up support for renewables and energy efficiency, EU countries have also diversified gas supplies, notably by increasing LNG imports from the United States. This has contributed to a stabilisation in prices, but prices remain elevated compared to pre-crisis levels.

Investment in grid infrastructure is becoming increasingly important as grid upgrades need to keep pace with the rapid expansion of low-emissions electricity generation. Annual spending on grids is set to exceed USD 70 billion in 2025, doubling the amount spent a decade ago. However, investment has not yet matched the pace of clean energy deployment, leading to inefficiencies such as long connection queues and difficulties in transmitting cheap renewable electricity from southern parts of the European Union to high-demand areas. These challenges are compounded by supply chain constraints, with EU component prices having more than doubled over the last decade. Moreover, trade in transformers is dominated by China, which accounts for 60% of EU imports.

The European Union also faces the challenge of deeper market integration. Despite significant investment in low-emissions technologies, average energy prices in Europe are higher than in other major economies. The EU energy market has also experienced notable disparities in spot prices among member states. As EU market prices rose in 2024, Spain experienced near-zero and even negative spot prices, resulting in the curtailment of renewable energy sources. These fluctuations are largely attributed to the rapid expansion of renewable energy without corresponding upgrades in storage and grid infrastructure. In April 2024 11% of variable renewable output was curtailed in Ireland due to insufficient capacity to transport or store electricity when demand was low. Volatility in electricity prices underscores the need for a more integrated energy system and substantial investment in grid infrastructure and storage.