The EU Electrification Action Plan’s Risks: assess your exposure

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This is a brief overview of the final Electrification Action Plan (EAP) document's risk areas for European industrial energy consumers, operators, and policymakers to consider now, ahead of the Commission's impact assessment in Q4 2026.

In this overview note, you will find:

• The risks raised by the final text

• Summary of commitments and KPIs

• Summary of stated benefits

If you are looking to go deeper and determine your positioning, engagement, or develop communication, let's chat. Book a call, or send us an email.

Quick policy recap

The Electrification Action Plan, adopted on 17 July, restates the 32% electrification KPI for 2030 set in the Clean Industrial Deal. It then goes considerably further, targeting 46% of final energy demand from electricity by 2040, against 23% today. The 2040 target is indicative for now. After the impact assessment it may become binding, as part of the post-2030 Energy Union package due in Q4 2026.

The measure is presented as an energy security and industrial competitiveness imperative. Its stated aims are: 1) reducing exposure to fossil fuel supply disruptions and high import costs; 2) lowering energy costs for European consumers and industry to improve competitiveness; 3) building industrial leadership in clean tech at home and abroad, as a result. These are the central objectives driving much of European energy and industrial policymaking across multiple documents (the Clean Industrial Deal, the Affordable Energy Action Plan, the Net-Zero Industry Act, the Clean Industrial Deal State Aid Framework, and AccelerateEU). The central belief is that through faster implementation of renewables-driven electrification, the European Union will reverse its de-industrialisation and boost economic growth, while also enhancing energy security.

The single biggest point of contention is energy mix and technology target setting by decree. It sits outside of the essential technical system planning, including cost and consumer impacts assessments that the 27 national regulatory and system planning authorities (and more sub-national ones) undertake. This is the greatest cost and effectiveness risk. The Council of European Energy Regulators (CEER) already issued a response on the same day as the EAP was released, signalling that their price-setting mandate won't be easily conceded. They have a point. Independence is central to the regulator's ability to do its job.

The plan announces that the 46% target will be subject to an impact assessment in Q4 2026. It does not specify what the impact assessment will cover. Here are the things to watch for.

I. The risks behind the EAP ambition

This is a quick list of what I see as the main economic and strategic risks for industry, consumers, regulators, and policymakers. The policy aims to reconfigure the entire energy system in a short period. That will take substantial capital and reach across the whole economy.

1. Feasibility of the 2030 and 2040 targets

Risk: policy design may come into conflict with physical, financial, and planning limits, resulting in excessive direct and indirect infrastructure-related costs.

• Getting to 46% by 2040 from 23% today means, simplified, building a second electricity system the size of the one Europe already has, in 14 years.

• That is roughly 5% more generation, transmission, and connected demand every year, for 14 years, from a baseline that has been moving the other way for a decade. EU electricity generation peaked in 2008 and has dropped by more than 7% since (Eurostat).

• For a sense of scale, China is the fastest electricity system builder in the world. It grew its electricity consumption by about 7.6% a year over the decade to 2025, doubling from 5,000 to 10,368 TWh (NEA). Europe needs roughly two thirds of that pace for a decade and a half. The difference is that China was adding new demand, as its energy use is still growing, while Europe's base is shrinking. Almost every unit Europe adds is a retrofit that has to come off other fuels.

2. Net energy cost impact

Risk: if the total cost side is underestimated, or the net benefits overestimated, there is significant risk that the action will increase net energy cost and hurt competitiveness, instead of helping.

• The plan promises lower electricity prices, immediately through changes to the tax portion of the bill to be implemented nationally. It does not assess the cost of the buildout, the connections, or ongoing operation, and it does not say who pays. It asserts that the reduction in the fossil fuel bill will offset the cost. That depends on succeeding in eliminating 40% of oil and 70% of gas imports, in fourteen years. Removing that much fossil demand is not itself free. It touches a large part of the economy.

• The plan lists the support money available, which adds up to over €210 billion. Whether that covers the cost, and whether the result is lower energy prices, is not addressed. (The EIB Group intends to provide more than €75 billion over three years; a €100 billion Industrial Decarbonisation Bank, which includes a €30 billion ETS Investment Booster, both established through the ETS revision proposal; €18.6 billion already committed through Horizon Europe, the Modernisation Fund and the Innovation Fund; €15.2 billion under the STEP competitiveness priority; €1.2 billion added to grids and interconnectors at the cohesion policy mid-term review.)

3. The cost of electrifying heavier industry

Risk: it is unclear what the plan intends to pursue for industrial electrification, because it addresses the technical feasibility of conversions but not the economic feasibility, which also includes efficiency.

• The plan states electrification is technically already feasible for 60% of industrial energy demand that relies on fuels, citing Fraunhofer ISI and Agora, and that it already delivers process heat to 400-500°C via "industrial heat pumps or electric boilers". For petrochemicals, it concedes electrification is at demonstration stage.

• Meanwhile, support tied to fossil fuel consumption is being withdrawn. Removing it improves the electricity-to-gas price ratio arithmetically, but it does not lower anyone's electricity price.

• The ETS Directive revision will make transitional free allocation of allowances conditional on investments into emissions reductions, including electrification. For ETS-covered industry this is a highly consequential line in the document, because it converts a free allocation from an entitlement into something contingent on capital spending.

4. Net economy and competitiveness impacts

Risk: without an economy-wide impact assessment that includes both gains and losses with quantified assumptions, there is a significant risk that the downside of losing the existing industrial base outweighs the upside of new demand spurring growth.

• The net positive economic impact rests on one assumption: that the expected gains from clean tech development, job creation, and cost reductions outweigh the higher costs for and the continued exit of industrial users. The former is not specifically quantified, and the latter is not included in the plan at all. That trade-off needs close examination, because the new clean tech base is thin and the existing industrial base is shrinking fast. I set out the numbers on both in the previous note here.
  

• I would be especially cautious with job claims that assume subsidising domestic demand will build domestic supply chains. China's dominance of the clean energy industry, after decades of demand subsidies in Europe and North America, points to a clear flaw in that assumption.

5. Regulatory uncertainty for rate setting

Risk: an intervention in national network charge setting leaves the rules behind roughly a quarter of an electricity bill unsettled, creating budget and investment planning uncertainty for industrial users who require predictability, especially in new investment decisions.

• Network tariff setting is a national regulatory competence. The network charges proposal adopted alongside the plan carries the electricity-gas tax differential provision and, according to CEER, amends Article 18 of the Electricity Regulation.

• The Council of European Energy Regulators (CEER) responded on 17 July, the same day, stating that the proposal risks undermining the independence of national regulators and asking that the final text safeguard their discretion.

6. Net energy security and grid stability impacts

Risk: an assumption that electricity-dominant systems are more secure by default creates significant energy security risk in itself, undermining the vulnerability assessment and the measures needed to secure them.

From my previous post: According to the IEA, China controls 60-85% of the five key clean energy technology supply chains, a far higher concentration than in oil and gas or most other strategic products. (read)

• The EAP says, for instance: "electrification helps shift globally from a fragile energy security landscape based on fossil fuels extraction towards a cleaner, resilient, predictable system based on technology cooperation. Especially for energy-poor nations, clean electrification can alleviate the effects of conflict and instability multipliers, such as the collapse of networks and fuel price volatility, and foster regional economic stability."

• Electricity systems are as physical as any other energy system. They convert primary energy inputs, run on equipment with commodities and supply chains upstream and downstream, and carry physical, economic, and cyber risk. All of it translates into price risk. The plan acknowledges this once, noting that tapping the EU's electrification potential requires "taking into account cyber, physical, and economic security threats to electricity networks".

7. Vehicle-to-Grid mandate

Risk: Mandating a costly capability, before a business case or a regulatory framework exists, creates a high risk of sunk costs that may never be recovered, and separately adds a cyber security risk.

• Vehicle-to-grid (V2G) capability requirements are introduced by end 2027 and apply to new EVs placed on the market as of 2030. V2G means the vehicle no longer simply draws from the grid one way. It can communicate with the grid and discharge back into it. That needs bidirectional hardware, injection metering, sophisticated pricing design, and robust cybersecurity. None of that framework is in place, and nor is the business case.

• The plan's only quantification bundles smart charging and V2G into a single figure of over €44bn a year in savings for BEV owners by 2040. These are different systems with different requirements and different infrastructure and operation costs: smart charging needs a meter and a time-varying tariff, while V2G needs everything listed above.
  

• Fifteen years of trials have produced commercial V2G offers in three countries: France, the Netherlands and the UK. Twenty-two EV models carry the capability, under 1.5% of all models, and every commercial offer bundles one specific car, one charger and one utility's tariff, with none crossing a border (IEA, Global EV Outlook 2026). California attempted the same mandate on all vehicles sold in the state and could not pass it.

II. Summary of the EAP's Commitments and KPIs

The plan commits fifteen actions and 56 sub-actions. Most are studies, platforms, alliances or encouragement to member states. Below are the ones that create obligations, with the plan's KPI attached where it sets one.

The headline target

• Electrification rate: 46% by 2040, from 23% today. Indicative, and subject to impact assessment in Q4 2026. The 32% figure for 2030 appears once, in a footnote.

Electricity price, flexibility, network codes, storage

• Network charges and codes. Rewards flexible grid use, accelerates smart meter rollout, and carries the electricity-gas tax differential provision. A new network code, plus revision of the codes on generator requirements and demand connection, follows during 2026.

• Fossil fuel subsidy phase-out. Measures proposed in Q4 2026, inside the post-2030 Energy Union package.

  KPI’s:

• electricity-to-gas price ratio of maximum 2.5 for households and 2.0 for industry by 2030. Only Finland and Sweden are below 2.0, on Commission calculations using Eurostat data for the second half of 2024. Delivery depends on national taxation, levies and network charges, all under national and sub-national jurisdictions.

• 200 GW of storage by 2030 and 500 GW by 2040, from around 55 GW in 2026.

ETS

• ETS free allocation. Transitional free allocation made conditional on investment in emissions reductions, including electrification. Member states to spend more ETS revenue on industrial decarbonisation. No KPI.

Data Centres

• Common Union rating scheme plus minimum performance standards to leverage flexibility for data centres. No date given, no KPI.

Heating and Cooling

• Clean heat market mechanism, by 2027. A rising heat pump sales share obligation on manufacturers, also used to fund installer training.

  • KPI: around 4 million heat pumps installed a year by 2030, from 2.4 million in 2025. A 67% increase in the annual rate.

• Waste heat: 11% of EU heat demand supplied from waste heat recovery by 2050.

• District heating and cooling: 15% of total heating and cooling supply by 2030, with networks growing 6 to 7% a year.

Electric Vehicles and Transport

• Bidirectional charging. V2G technical requirements for vehicles, including standardised communication protocols, via the Omnibus IX delegated act. Introduced by end 2027, applying to vehicles placed on the market from 2030. AFIR is reviewed during 2026, and its technical specifications will be updated to require bidirectional capability.

• Clean Vehicles Directive review by Q4 2027, to assess and possibly strengthen public procurement targets for zero-emission vehicles.

  • KPI: by 2040, sufficient grid connections for public and depot HDV charging to enable 40% battery electric propulsion of the EU truck fleet. A connection target, not a fleet target.

  • Ports: by 2040, port grid capacity and shore-side charging sufficient for one third of the EU ferry fleet. A connection target, not a vessel target.

* The plan assumes an electrification-led transition could bring approximately 120 million battery electric vehicles, against 8 million today. It sets no KPI or target for this, and no action in the plan delivers it.

*Passenger cars are governed by the CO2 emission performance standards for cars and vans, Regulation (EU) 2019/631 as amended in 2023, which requires a 100% CO2 reduction for new cars and vans from 2035. That regulation, not the EAP, is what would deliver the assumption.

*The Commission opened the statutory review of that regulation in July 2025 and has since proposed weakening the 2035 requirement. Parliament and Council are handling the revision through 2026, in parallel with the EAP's own impact assessment. So the plan books an EV fleet from an instrument that is being loosened at the same time.

III. Summary of stated benefits

The list below consists of the expected benefits, with stated sources in brackets where available.

Economy-wide

• Gas imports down more than 70% and crude oil imports down more than 40% by 2040

• Up to €260bn a year saved on the fossil fuel import bill by 2040

• Electricity generation costs lower by about 20%, leading to more affordable tariffs

• More than 2,000 Mt CO2 avoided in 2040, restated in a footnote as 20-30% of current emissions

• 260 GW of wind and solar added since 2021 displaced 14 bcm of gas in 2025, saving over €5bn

• Clean energy accounted for 30% of EU GDP growth in 2023 (IEA commentary, which states the share is inflated by weak EU growth of around 0.5%)

Consumers

• A BEV saves up to 78% against an equivalent fossil-fuelled car (evroutes.com, using residential electricity prices)

• A heat pump cuts the average household heating bill by up to 60% (DG ENER article, stated elsewhere in the plan as 20% to over 60%)

• Over €44bn a year for BEV owners by 2040 from smart charging and V2G combined (Commission analysis, on ENTSO-E TYNDP and T&E assumptions)

• A heat pump subsidy scheme would generate savings for 16 of 23 million target households (Commission estimation)

Industry and jobs

• Electrification technically feasible for 60% of fuel-based industrial energy demand (Fraunhofer ISI and Agora)

• Steel sector electricity demand potentially more than doubling to 165 TWh by 2030 (Eurofer position paper on this plan)

• Industrial waste heat recovery potential of 300 TWh a year (RE-WITCH 2025, Danfoss Impact 2023)

• Geothermal could meet at least 10% of Europe's electricity needs and 25% of heating and cooling demand (Ember, February 2026)

• Distribution grid investment sustains 440,000 to 620,000 jobs a year (Eurelectric and E.DSO, Monitor Deloitte, January 2021, covering EU27 and UK)

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