Demand-side electrification and heat pump rollout are pointed out as vital for the energy transition in EU in the European Commission’s recently published electrification action plan. This is a plan to make Europe the first electro-continent. For the heat pump sector, it’s a true paradigm shift. According to the plan heat pump installations should increase to 4 million per year by 2030, from 2.4 million in 2025. To get there, it sets out measures including improving electricity-to-gas price ratios, ensuring electricity is taxed no higher than gas, supporting flexibility and accelerating industrial electrification.
The European Commission published an electrification action plan on July 17 aimed at speeding up the shift from fossil fuels to electricity in Europe across all sectors – buildings, industry and transport. The goal is to make Europe the world’s first “electro-powered” continent by aiming to increase electrification from today’s 23% of energy use to 46% by 2040. By reaching this goal, the EU could save €260 billion per year in fossil fuel imports. Through this action plan, the Commission aims at boosting Europe’s competitiveness, decarbonisation and independence.
The benefits of moving to electrification include:
- reducing dependence on imported fossil fuels, which will make Europe more independent and competitive, and reduce vulnerability to geopolitical shocks
- modernising and decarbonising Europe’s energy system, which will help accelerate the green transition
- bringing benefits for European consumers
However, several challenges still need to be addressed: One is that electricity often costs three times more than gas another that grid connections can take many years to realize. Moreover, many innovative technologies never reach commercial scale and many companies have too little incentive to make the switch from fossil fuels to electricity.
The new plan address all of these challenges by proposing a series of measures that will help reduce the price gap between electricity and fossil energy costs, that will ensure electricity is taxed no higher than gas, that will support flexibility and accelerating industrial electrification and waste heat recovery. The plan focuses on boosting electrification of demand and is incentivising the uptake of cleaner, electricity-based technologies such as heat pumps, electric vehicles and batteries, among others.
One significant commitment is the proposal to improve the electricity-to-gas price ratio by reducing national ratios to a maximum of 2.5 for households and 2.0 for industry by 2030. The plan also states that Member States should not tax electricity more than gas – currently in many countries, electricity is taxed multiple times more than gas.
To address upfront costs of heat pumps, the Commission proposes expanding financing and social leasing schemes, leveraging public procurement for accelerating heat pump uptake and improving price transparency for consumers.
Since electrification requires a smarter and more flexible energy system, the Commission proposes measures to reform network charges, accelerate smart meter deployment and better integrate heat pumps into demand response markets. These reforms will allow consumers to reduce their energy bills while helping balance the electricity grid.
The Action Plan also sends a strong signal to industry. It states that around 60% of industrial fuel-based energy demand can be electrified using heat pumps and backs this with different types of financing support.
To ensure that this action plan delivers, the European Commission must swiftly convert it into legislation and measures to enact at national level.