Will the new commission accelerate the massive electrification of EU economy?

This article was exclusively written for The European Sting by one of our passionate writers, Mr. Ihor Moshenets, a PhD candidate at Central European University (Vienna, Austria). The opinions expressed within reflect only the writer’s views and not necessarily The European Sting’s position on the issue.

In January Ursula von der Leyen announced that the modernized EU supergrid would play the central role in the new plan of her second Commission on bringing down energy prices. The document is expected to be published by the end of February, leaving a lot of questions about its details.  Will the second von der Leyen Cabinet break the long-term trend of the EU economy’s stalled electrification rate? And to what extent will electrification be effective as a tool for the economic competitiveness agenda of the new Commission?

Getting into priority agenda

Last autumn, Electrification Alliance, a coalition uniting ten business associations urged the Commission to adopt the ambitious Electrification Plan providing financing to the rapid expansion of European grids in the first 100 days of its tenure., The call was reiterated in December, being addressed to the new Commissioner of Energy. Business is not alone in voicing those demands: electrification plans are also in the focus of an analytical analysis of many environmentalist NGOs.

Such attention to this specific type of energy infrastructure is not coincidental. The most recent technical assessment of the decarbonization plans of European Commission stipulates the increase of the share of electricity in final energy consumption from the current 33% to 54%. Additionally, technological upgrading of grids is essential for integrating weather-conditioned unstable inflow of wind and solar electricity to the grid, which  have already accounted almost half of overall EU electricity generation in 2023. Moreover, better interconnection of transborder transmission lines would allow better market integration and regional price convergence. 

Nevertheless, the whole set of problems calls for more targeted policy intervention. First, electricity’s share in final EU energy consumption has stagnated at 23% during the last two decades. Second, the implementation rates of infrastructure projects already selected for European support  in framework of 10-year network  development plans, still need to be increased. Third, financial support for grid modernization and further electrification is fragmented and scattered among different programs, and the ways of meeting increased investment demand are yet to be defined. What makes problem even more pressing is that fact that around one third of Europe’s low-voltage electric lines have been exploited for over 40 years. That requires significant investments in grid modernization –  584 billion euros until the end of decade, according to Commission’s estimations.

As a result, electrification planning is expected to play a much more prominent role in the second von der Leyen Commission’s agenda triggering increase of advocacy activities of relevant industrial and non-profit stakeholders. 

Stakeholder demands

What exact measures have been advocated so far? 

First, setting of binding electrification indicators as a mandatory part of National Climate and Energy Plans(is seen as a solution addressing EU’s stagnating electrification rates. The Electrification Alliance calls for the following target: increase from the current 23% to 35% by 2030, to 50% target by 2040, and have 71% of the economy electrified by 2050. 

Second, simplification of permitting procedures and overall rules of electricity network planning allow for sorting out the most feasible projects. European hurdles in this regard are not unique:  according to the International Energy Agency’s data, the number of wind and solar power projects waiting in the queue for the ability to be connected to the grid is outnumbering five times the capacity of wind and solar energy installed during 2022. 

Third,  establishing the Industrial Electrification Alliance is seen as a tool to facilitate the cooperation of EU policymakers with private actors on sharing expertise and financing pilot projects. Commission personnel has already relevant experience since similar cooperation platforms were already launched for storage batteries, clean hydrogen, and small modular reactors,

Fourth, another important stakeholder demand is creating a single entity unifying the fragmented set of programs supporting cleantech development. The launch of the Clean Energy Delivery Agency was proposed in the Letta report on the future of the single market, but it was omitted in the political guidelines of the new Commission.

Fifth, at the same time, advocacy communication often stresses the zero-sum issue of shifting public funding priorities to electrification at the expense of alternative decarbonization technologies, especially in relation to hydrogen projects. 

Balancing and incrementalism?

Different policy preferences regarding grid development are main factors shaping the elaboration of new Commission’s approach for balancing industrial decarbonization and economic competitiveness. The main problem here is clearly articulated:  the rapid increase in the differences in energy prices between Europe and the US with China was highlighted in both Letta and Draghi reports. In particular, Draghi report cites a lack of natural resources, underutilization of importer bargaining power, and certain deficiencies in permitting and market regulation as primary reasons. In turn, high energy prices stimulate deindustrialization, affecting foremost energy-intensive industries, such as steelmaking, paper, and chemical industries.

Considering different time horizons, the effect of electrification and renewable energy electrification and renewable energy might be differentiated. Common wisdom is that electrification requires high initial investments but might drive the price down and increase innovation in a longer-term perspective. But how will the new Commission balance long-term climate goals with short-term economic stability to finance future advancements? 

Nevertheless, adopting the policy agenda of the first von der Leyen Commission taught that even significant policy shifts are still accompanied by a hefty dose of incrementalism. Increasing policy actions to simplify permitting, optimizing tariffs rates calculation, more efficient grid planning procedures, and allocation of additional financing seem like a politically feasible goal.  Many of those measures were already outlined in Commission’s “Competitiveness Compass” published at the end of January. However, rapid structural changes significantly increasing the percentage of the EU economy’s electrification in line with projected increases could appear much more challenging. This is especially true if we consider the potentially unclear situation with electricity demand and political strategies for managing possible contestation caused by the short-term economic cost of decarbonization. 

It is unlikely that the first hundred days of the new Commission will answer all questions about the novelties of its approach, but many expectations could be confirmed already at this stage. This makes winter 2025 a special period for monitoring medium-term tendencies of EU governance.

About the author

Ihor Moshenets is a PhD candidate at the Central European University (Vienna, Austria). His doctoral project is dedicated to the exploration of EU Green Deal decisions in defining the role of natural gas, hydrogen, and nuclear energy in EU decarbonization pathways. His research interests encompass broader issues of international political economy of energy, energy geopolitics, and public policy theories. Additionally, Ihor’s independent applied research was published by such platforms as the Foreign Policy Research Institute (US), Energy Post (EU), and Ukrainian outlets (Dzerkalo Tyzhnia, European Pravda, Vox Ukraine).