Gavin Maguire

Europe has almost one answer to every major energy challenge: electricity. Want to cut emissions? Use electricity. Want to shield consumers from gas market volatility? Use electricity.

Want to restore energy security after the Russia-Ukraine war? Use electricity. The strategy is logical: as Europe strengthens its energy system through wind, solar, hydro, and nuclear power, it improves efficiency and reduces the region's energy import bill. The European Commission has even set a vision to make Europe the world's first continent to rely on electrical energy, targeting a significant increase in electricity's share of total energy consumption. But Europe's energy transition is entering a more difficult phase.

Building renewable power plants was the relatively easy part; convincing millions of households, drivers, and industrial companies to use more electricity is far harder due to the prohibitive cost barrier. The challenge for policymakers is that electrification is no longer primarily an engineering problem, but an economic one. For years, Europe's energy debate focused on supply, with governments rushing to install wind turbines and solar panels, strengthen electricity grids, and reduce dependence on Russian gas.

These efforts have yielded tangible results: renewables now account for about half of EU electricity generation, according to the European Commission. Now, attention is shifting to demand. The Commission estimates that electricity still only represents about 23% of total energy consumption today, despite years of progress in clean power generation.

To meet EU climate and competitiveness goals, electricity's share must rise significantly and quickly. This means convincing drivers to buy electric cars, homeowners to install heat pumps, and factories to replace fossil fuel processes with electric alternatives. In theory, this should already be underway.

Electric motors are far more efficient than internal combustion engines. Heat pumps can deliver multiple units of heat for each unit of electricity consumed. Electric industrial processes can reduce emissions while improving energy efficiency.

Electrification is a cornerstone of two of Europe's most important concerns—energy security and competitiveness—because it reduces reliance on imported fuels, as the International Energy Agency recently noted. The problem is that consumers and businesses respond to economic considerations, not theory. Europe wants people to use more electricity, yet it is still much more expensive than fossil fuels.

The Commission itself admits that electricity prices are still about three times the cost of gas, a major barrier to expanding its use. This contradiction lies at the heart of Europe's electrification dilemma. Households considering replacing a gas water heater with a heat pump may be in favor, but if upfront costs are high due to financing costs and high electricity prices, many will delay the decision. The same applies to industry.

European manufacturers already face concerns about their competitiveness versus rivals in the US and China. It becomes very difficult to ask these companies to electrify if it raises production costs in the near term. Adoption slowdown signs of danger are emerging. Heat pumps were once one of the fastest-growing energy transition sectors in Europe. After years of rapid expansion, sales slowed sharply in 2023 as gas prices fell, interest rates rose, and government support clarity declined.

The European Commission's Joint Research Centre reported a decline in sales after the record growth of 2022, while industry groups warned of investment delays and job losses. This slowdown is critical because heat pumps represent one of the clearest and most cost-effective ways to electrify buildings. More broadly, Europe's experience highlights a fact policymakers sometimes underestimate: consumers do not adopt energy technologies just because they are cleaner; they adopt them when they are affordable, convenient, and reliable.

The continent faces another hurdle too. Electrifying buildings requires massive grid expansion. New wind farms and solar projects are of limited value if grids cannot connect them.

Electric vehicles need charging infrastructure. Factories need electrical connections. Homes need upgraded distribution networks. Electrifying buildings requires massive grid expansion. Yet grid bottlenecks have become common across much of Europe, with connection queues stretching for years in some markets. The Commission has reiterated this repeatedly.

Researchers have identified slow grid development as a key barrier to electrification. This does not mean Europe's strategy is wrong. In fact, the long-term logic remains compelling. The bloc imports large amounts of fossil fuels, spending about 380 billion euros ($434 billion) on fuel imports in 2024, according to the IEA. Reducing this dependence would boost energy security and economic resilience.

The question is whether policymakers have fully accounted for the gap between the desired goal and the path needed to achieve it. For much of the past decade, Europe focused on how to generate clean electricity. The next decade will be defined by a different challenge: how to make electricity the best economic choice. This means lower energy prices, faster grid buildout, stable incentives, and reduced investment barriers.

Without these reforms, electrification risks becoming a bottleneck to Europe's energy transition rather than its driver. The continent's clean energy future ultimately depends on a surprisingly simple thing. Europeans do not just need an abundance of clean electricity; they need a compelling reason to use it.

Economic columnist at Reuters and energy specialist