The European Electrification Action Plan: when does electrification pay?

No industrial board will approve an electrification project because Brussels has set a 46% target. It will approve when the electricity price, network charges, grid connection, equipment, permit, funding and expected return align at a specific site.

Published on 17 July, the Commission’s Electrification Action Plan (EAP) sets an indicative objective for electricity to reach 46% of EU final energy consumption by 2040, subject to an impact assessment in the fourth quarter of 2026. In practice, the measures determining the business case are distributed across EU legislation, national governments, energy regulators, grid operators and funding authorities.

Each controls a different part of the calculation. The same technology may therefore be commercially attractive in one Member State, delayed in another and unviable at a third site.

The deeper question is no longer whether Europe can electrify. It is whether companies can align all the decisions required to make electrification investable.

One target, 27 investment environments

Electricity has remained at around 23% of EU final energy consumption for a decade. For European companies, it is also almost three times as expensive as gas on average. The Commission is encouraging Member States to reduce the electricity-to-gas price ratio for industry to no more than two by 2030.

That ratio matters more to an investment committee than the 46% headline. It can determine whether an electric boiler, industrial heat pump or redesigned production process offers a credible return.

The calculation will differ by technology and site. It will reflect efficiency, operating hours, carbon costs, network charges, flexibility revenues and the terms available through long-term electricity contracts.

The Action Plan seeks to improve this equation through taxation, network tariffs, storage, flexibility, power-purchase agreements and the gradual phase-out of fossil-fuel subsidies. Many of these levers remain national, including important decisions on taxes, levies and support schemes.

The result could be one European ambition but 27 different investment environments. Electrification policy may increasingly influence not only whether companies invest, but where they locate production and future capacity.

Network reform could redistribute industrial advantage

The Action Plan is accompanied by a legislative proposal amending the Electricity Regulation. Unlike the Commission Communication, the proposal will be negotiated by the European Parliament and Council under the ordinary legislative procedure.

It would strengthen the principles governing network-charge design, including locational signals, incentives to reduce peak demand, capacity and time-of-use elements, flexibility and more efficient use of existing grids. National regulators would retain responsibility for fixing or approving tariff methodologies, within a more detailed EU framework.

The proposal would also allow regulators to establish separate, cost-reflective charging arrangements for categories of users with distinct consumption patterns, including energy-intensive industries and data centres.

This could create advantages for companies able to shift consumption, use storage, generate electricity on site or locate demand where sufficient grid capacity exists.

It could also redistribute costs. A flexible industrial site may benefit from the new tariff signals, while an inflexible user consuming during network peaks may face a less favourable outcome.

Network reform is therefore more than an affordability measure. It may determine which industrial behaviours, locations and technologies the electricity system rewards.

Grid queues are becoming a test of project readiness

A competitive electricity price cannot support an industrial project without a credible connection date.

The accompanying proposal would allow national regulators, particularly where grid capacity is scarce, to approve transparent and non-discriminatory measures addressing speculative or immature connection requests. These measures could consider project maturity and progress, congestion impacts and wider economic, environmental or social benefits. Regulators could also prioritise categories of users or users within a category, while retaining discretion over the national approach.

Where national regulators use these proposed powers, entering the queue first may no longer be enough: project maturity, progress and system impact could also influence priority.

This changes the investment sequence. Permits, finance, equipment planning and energy contracts may help determine access to the grid rather than simply following it.

Companies should therefore treat grid strategy as part of project design from the beginning. Connection capacity, flexible-access arrangements, storage, on-site generation and demand response should be considered alongside the production technology.

Project readiness may become an infrastructure advantage.

Funding will favour projects that can move

The EAP points to more than €75 billion in planned EIB Group financing over the next three years for electrification, grids, storage and flexibility. It also relies on instruments proposed under the parallel ETS revision, including the €100 billion Industrial Decarbonisation Bank and its €30 billion Investment Booster. The Commission also plans a second industrial-heat auction under the Innovation Fund in 2026.

The proposed support can extend beyond the production equipment itself to grid connections, on-site energy-management systems, batteries and thermal storage.

That breadth matters but timing matters more.

Industrial projects have narrow decision windows. Companies need sufficient certainty before ordering equipment and committing capital. Funding awarded after a final investment decision may improve the economics, but it may arrive too late to determine whether the project proceeds.

The first opportunities are likely to favour companies with mature projects: defined costs, measurable emissions benefits, a credible grid pathway, permitting progress and robust operating assumptions.

Funding will reward preparation, not support for electrification in principle.

Electrification is a portfolio, not a doctrine

The Commission estimates that around 60% of industrial energy demand currently met by fuels is already technically electrifiable, particularly through technologies such as industrial heat pumps. The technical and commercial readiness, however, varies considerably between processes and temperature requirements.

The Plan recognises that direct electrification will not be the most effective solution for every industrial use. It also addresses renewable heat, thermal storage, hydrogen for applications where direct electrification is not feasible or cost-effective, and carbon management for harder-to-electrify processes.

Industrial waste heat adds another layer. The Commission estimates a recovery potential of around 300 TWh per year and plans an EU Waste Heat initiative by the second quarter of 2027. It also proposes sector-specific electrification roadmaps and cluster-based partnerships connecting industrial sites, technology providers, energy suppliers and flexibility services.

The strategic choice is therefore not to electrify every process at any cost. It is to identify where electricity creates the strongest commercial, energy-system and emissions outcome, while developing complementary routes for the rest.

The policy will arrive in pieces

The Electrification Action Plan is a Commission Communication organised through a portfolio of actions. It is not one legislative file with one negotiation and one implementation date.

Its accompanying Electricity Regulation proposal will pass through Parliament and Council. Other measures will emerge through network codes, funding calls, sector roadmaps, Commission guidance and future initiatives on heating and cooling, hydrogen, transport and skills. National authorities will retain important roles in taxation, permitting and support, while regulators and grid operators will shape tariffs and connection practices.

The Commission also plans a methodology for assessing industrial flexibility, a possible EU mechanism for pooling industrial electricity demand and a GeoDep tool to compare location-specific factors such as generation, infrastructure and electricity-to-gas price ratios.

These measures could influence energy purchasing, site selection, grid access and the value companies receive from flexibility. They will also unfold through different institutions and on different timelines.

The between-the-lines reading is clear: Europe has not created one electrification policy. It has divided the industrial business case among several decision-makers.

Four assessments companies should begin now

First, companies should identify the switching point for each process and site under different electricity and gas prices, network charges, carbon costs, operating hours and flexibility revenues.

Second, they should build a project-readiness file covering grid access, permits, equipment, energy procurement, storage options, capital requirements and potential funding.

Third, they should compare investment locations. National taxation, tariff design, infrastructure availability and public support may make the same technology perform differently across Europe.

Fourth, they should map who controls each decision and when it can still be influenced: Parliament and Council for the accompanying legislation; the Commission and financing bodies for technical initiatives and funding calls; national authorities for taxation and support; and regulators and grid operators for tariffs, connection rules and implementation.

These assessments turn a broad commitment to electrification into a strategy for investable projects.

Contact the logos team to identify which Electrification Action Plan measures can change your business case, map the EU and national decisions that matter, and translate project evidence into a focused public-affairs and funding strategy.

Europe can set the electrification target. Investment will move at the speed of the decisions that make it commercially viable.