Europe’s electrification rate has been stuck at 23% for a decade. The Commission finally has a plan.
The Commission's leaked Electrification Action Plan could finally accelerate Europe's stalled transition, if it delivers on electricity prices and implementation.
(This is a Bright Spots special edition.)
For ten years, the share of electricity in Europe’s final energy consumption has barely moved. It sits at 23%, roughly where it was 10 years ago. China, Korea and Japan are already past 30% and pulling away fast. The lack of progress with electrification explains why Europe keeps getting caught out by fossil fuel price volatility caused by geopolitical shocks. The now leaked draft of the Commission’s Electrification Action Plan (COM(2026) 595), due for adoption at the end of the year, is the first serious attempt to catch up.
I’ve now read the whole thing, and the framing is broadly right. The Commission positions electrification as the route to lower prices, more security and a stronger industrial base, not just a cost to be managed. In this piece I set out what is genuinely new, what is being re-announced, and the one or two ideas that could actually move the needle.
The key barrier the plan gets right
Let’s start with the number that matters the most. Electricity in Europe costs companies almost three times as much as gas. Only in Finland and Sweden does the electricity-to-gas ratio drop below two and in some countries it is closer to four. As long as that gap persists, the economics of switching to a heat pump or an electric process remain challenging. This shows in the data: For example, Member States with the lowest price ratios record triple the heat pump sales of those where the ratio is above three.
So the headline commitment is a KPI to bring national electricity-to-gas ratios down to 2.5 for households and 2 for industry by 2030, backed by a legislative proposal on “future-proofing electricity bills” landing alongside the plan. I went through that proposal in detail when it leaked separately a few weeks ago (my write-up is here), and it is worth recapping what it does, because it is the machinery that would make this KPI real.
The proposal treats the whole bill rather than the wholesale price alone. On network charges, which already account for between a quarter and a third of the average household bill and will only grow as grid investment climbs toward €100 billion a year, it rewrites the rules so tariffs reward flexibility and demand shifting, with ACER benchmarking transmission operators and national regulators doing the same for Europe’s 2,600-plus distribution operators. It sets a smart meter floor of 50% of customers by 2030 and 65% by 2033, which matters because time-of-use tariffs do very little without them (Germany is still below 5%). The cleverest move is on tax. By stating that electricity may be taxed no higher than gas, and anchoring that principle in the Electricity Regulation under Article 194, the Commission shifts the decision to qualified majority voting and sidesteps the unanimity that has kept the Energy Taxation Directive frozen for years. In several countries electricity currently carries the heavier tax burden, so this reverses the signal at source.
That is where the plan either touches the real economics or stays at the level of aspiration. Taxes and levies fall more heavily on electricity than gas in most Member States, and fossil fuel subsidies are still distorting the choice. If the Commission follows through here, it could be a game-changer.
A big idea: a clean heat market mechanism
The heat pump section is where the plan really surprised me. There is a KPI to double the installation rate by 2030 compared to 2025. We have seen similar announcements before as part of the REPowerEU Strategy.
What caught my eye is not so much the KPI but the key mechanism proposed: By 2027 the Commission will explore a clean heat market mechanism, obliging manufacturers to grow their share of clean heat sales and pushing installers toward heat pumps while narrowing the upfront cost gap. This is an instrument I and colleagues have long promoted through detailed academic analysis and a handbook for policy makers.
If that moves from “explore” to “propose”, it could fundamentally reshape the market in a way subsidies alone never have. A supply-side obligation changes the incentives of the people actually selling heating systems, rather than waiting for households to make the leap on their own. It is the kind of instrument that has worked for other technologies such as EVs, renewables, and energy efficient appliances. Seeing it named so prominently is a step I did not expect.
Two smaller heat pump measures are also worth flagging because they solve specific but important problems. The Commission will look at mandating heat pumps in public buildings through procurement rules, which creates guaranteed demand and helps the value chain. And it will support national online comparison tools so households can get a transparent, comparable “heat pump quote” from different brands and installers. Anyone who has watched quote inflation kill an installation will understand why price transparency matters as much as any subsidy.
Green VAT, flexibility and other parts that make sense
A few other measures are new and useful. As part of the Green VAT initiative from the Clean Industrial Deal, the Commission will present a framework for Member States to cut VAT on electrification assets: EVs, heat pumps, household batteries and industrial electrification. Tax is one of the fastest levers a government has, and only six Member States currently apply a lower VAT rate to heat pumps than to gas boilers.
On flexibility, the plan raises the storage ambition to 200 GW by 2030, up from around 55 GW today. Alongside it, the Commission will introduce vehicle-to-grid requirements for new EVs by the end of 2027, including the interoperability standards that make V2G actually work, and will assess smart charging by default in EV supply contracts by mid-2027. Both are sensible and overdue. There is also a commitment to develop, by 2027, a methodology for assessing flexibility potential across industrial processes and data centres, which fills an important and longstanding knowledge gap.
The parts that are being re-announced
Not everything here is new. Much of the industry section restates commitments already on the table. The ETS Directive revision that channels more national ETS revenue into industrial decarbonisation, the €100 billion Industrial Decarbonisation Bank with its €30 billion ETS Investment Booster, and the second industrial heat auction under the Innovation Fund in 2026 were all announced before. I am of course glad industrial electrification sits at the centre of the plan, since it remains the most underappreciated lever we have, but there is less new policy reform in this section than the length suggests.
Some of the EV measures are similarly incremental. BEVs have climbed to a record 20.4% of new sales so far in 2026 and saved an estimated €4.1 billion in avoided oil imports last year, so the trajectory is strong. The plan promises a review of the Clean Vehicles Directive by Q4 2027 and a recommendation on demand-side incentives by Q4 2026. Helpful, but this is fine-tuning rather than a new direction.
The global ambition
Internationally, the plan builds on Electrify Now, the platform launched on 23 June 2026 with the COP presidencies and the IEA. The Commission wants to assemble a coalition committing to global clean electrification, anchored in the tripling of renewables and a new objective to reach 35% electrification worldwide by 2035, which the COP31 presidency is championing (I covered this elsewhere). Europe positioning itself as the first “electro-continent” is a good story, and export markets for European heat pumps, batteries and grid technology are the prize if the manufacturing base holds up.
The bottom line
The diagnosis in this plan is excellent and directionally correct. The electrification target itself is still a bracket, [X]% of final energy by 2040, and many of the verbs are “explore”, “assess” and “will support”. The effectiveness of the plan will depend on whether ambition translates into action on the ground.
What I will be watching between now and adoption in Q4 2026 is two things: whether the target lands at a level that forces the pace rather than ratifying the status quo, and whether the electricity bills proposal genuinely rebalances the taxes and levies that keep electricity expensive. Get those right and this is the moment Europe’s electrification rate starts climbing again.