Europe’s energy security on the path to climate neutrality

As the EU advances towards climate neutrality, structural trends are emerging that mark the bloc’s entry into the mid-transition phase of its energy transformation [1]. This phase is defined by a rapid ramp-up of new energy technologies and systems, creating unprecedented opportunities to strengthen energy security alongside innovation and competitiveness, but also new challenges. It requires the underutilisation, decommissioning or repurposing of fossil infrastructure to be actively managed, as well as an increased focus on power system stability, cybersecurity and green industry resilience.

Unlike the final stages of the transition towards climate neutrality, when climate and energy security priorities will align, the mid-transition is characterised by new but manageable (temporary) challenges. Increasingly high shares of domestic variable renewable energy (VRE) require modernised approaches to grid operation, planning and flexibility services, which in turn will reduce reliance on imported fossil fuels and contribute to greater price stability and energy sovereignty. Traditional business models are challenged, digitalisation increases the importance of cyber resilience, and more frequent weather-related disruptions – due to climate change – add further complexities. Emerging dependences on imported clean technologies and materials, often from geopolitically sensitive regions, require strategic management to avoid replicating past vulnerabilities. 

This ongoing transformation is unfolding amid escalating geopolitical turbulence. Russia’s invasion of Ukraine reconfigured global gas markets, generating a volatile energy price environment across Europe. In parallel, pressures on supply chains and shifting geopolitical relationships have intensified, while objectives for supply diversification and cost reductions often compete. These trends are emerging in a global trading system that is seeing multilateral rules eroded and increasing fragmentation. Meanwhile, geopolitical divides complicate global cooperation on decarbonisation, calling for more proactive industrial and trade diplomacy. 

Yet the mid-transition also creates an opportunity for the EU to redefine its global role through clean energy leadership. The EU is well positioned to turn the energy transition into a source of long-term strategic advantage. It has critical assets that can be used to advance decarbonisation and enhance energy security. These include a large single market with unified external negotiating power; a sophisticated and stable regulatory framework for energy and the climate, backed by the advanced technical expertise of its regulatory authorities and commercial actors in managing a decarbonising energy system, including in its cross-border dimensions; sizeable instruments with which to mobilise capital at scale for infrastructure and technology deployment internally and externally, and strong renewable sources within the EU and its immediate neighbourhood. These foundations will allow the EU to develop a more resilient, efficient and autonomous energy system while supporting global clean industrial development.

At the same time, persistent limitations will need to be overcome if these strengths are to be leveraged. While industrial policy is increasingly recognised as a key geoeconomic asset, the EU’s current resources and frameworks remain insufficiently coordinated and scaled to fully support the external strength of Europe’s trade policy. In addition, political uncertainty is rising, driven by external pressure and growing political forces advocating for weaker policy frameworks and a stronger national focus in key policy areas. Conflicting priorities are becoming more prominent, as is a limited appetite for expanding integrated spending capacity. In this complex environment, aligning cost-effective decarbonisation and resilience goals remains a strategic challenge, but one that must be overcome in order to achieve lasting security, competitiveness and climate stability. 

This policy brief aims to map key risks and vulnerabilities emerging from mid-transition trends in the move towards a clean energy system and declining fossil fuel interdependence. Based on this mapping, the paper proposes a new agenda for internal and external energy security to maximise synergies while minimising tension between climate and energy security objectives. 

It argues that even in the more complex mid-transition phase, climate action is delivering strategic benefits for energy security. As the risks shift from external supply volatility to internal system coordination – where EU policy can act with greater agency and foresight – the remaining vulnerabilities will be more manageable overall than those associated with a fossil fuel-based system. These challenges can be addressed by coordinating gas demand reduction, ensuring power system stability, and ensuring resource resilience in specific critical material and technological interdependencies.

2.2 Electrification

Direct electrification is a core element of a decarbonised energy system. Under the Fit for 55 policy framework, the European Commission expects the electricity share of final energy consumption to reach around 33 percent by 2030, then increasing to 50 percent by 2040 if an emission reduction target of 90 percent is achieved (European Commission, 2024). Electrification improves efficiency by avoiding the energy losses associated with converting fuels into heat or motion. Greater efficiency narrows the gap between primary and useful energy consumption, with benefits for energy security via a reduced need for energy imports. These opportunities are particularly pronounced in buildings, industry and road transport. In the buildings sector, heat pumps – leveraging ambient heat – could reduce gas demand by 511 terawatt hours (TWh) per year by 2030, compared to 2018 and by further 823 TWh/year by 2040, with only a modest increase in electricity consumption (Agora Energiewende, 2023). This could translate into a decrease in foreign gas purchases equivalent to 21 billion euros in 2030 and 34 billion euros in 2040 [3] for the residential sector, compared to the business-as-usual scenario. In the EU-27 manufacturing sector, increasing electricity’s share of industrial final energy consumption from 29.7 percent (2018) to around 34 percent by 2030 and 43 percent by 2040 [4] could contribute to reducing industry’s gas consumption to 588 TWh/year and 94 TWh/year respectively (Agora Energiewende, 2023), saving on foreign gas purchases amounting to 15.19 billion euros in 2030 and 35.64 billion euros in 2040 compared to the business-as-usual scenario. In Germany alone, electrifying low- and medium-temperature industrial process heat can save 90 TWh/year of natural gas by 2030. This represents up to three quarters of the savings required from industry by the REPowerEU Plan (Agora Industry, 2022), worth 3.72 billion euros at 2023 prices. For most end uses, direct electrification offers better and more immediate energy security benefits than hydrogen-based decarbonisation pathways. Opting for direct electrification rather than electrolytic hydrogen use in industrial and residential heating and transport requires less additional power generation capacity (Fraunhofer ISI, 2024) or less reliance on imported hydrogen. The case is even stronger if the currently slow ramp-up of electrolysers forces continued reliance on fossil-based hydrogen. 

Moreover, imported hydrogen can imply logistical and contractual rigidity, as well as probable supply concentration, at least initially. These would entail energy security challenges comparable to those associated with natural gas supply chains (Giuli and Oberthür, 2023). Finally, the broad-ranging electrification of end uses can support power system stability, if deployed in combination with demand-side response and electric and thermal storage, thus reducing the needs – and costs – of grid infrastructure adaptation. On the other hand, deeper electrification leads to greater reliance on a single carrier – electricity – and is therefore a less diverse energy system. These security concerns are compounded by the increasing incidence of critical infrastructure sabotage, which is becoming a prominent hybrid warfare tool. Second, for as long as gas sets the power prices at the margin, electrified end uses remain exposed to the price volatility of imported fossil fuels.

However, these risks can be effectively mitigated. First, high vulnerability to electricity supply shocks is already a feature of today’s fossil-based energy system, with electricity currently accounting for around 23 percent of final energy consumption (Eurostat, 2024). Given electricity’s critical role in society, even many energy services currently met by natural gas or oil would not be available in case of a black-out: for instance, most petrol stations and gas-based heating systems rely on electricity-driven pumps. In addition, the rapid decline in the cost of distributed power generation and storage enables decentralised backup, enhancing resilience. Second, a more rapid deployment of clean power generation, combined with flexible electrification could help greatly to reduce the number of hours when fossil gas sets power prices, and therefore the exposure of end uses to power price volatility. As such, accelerating the electrification of end-uses serves both climate objectives and energy security.

To maximise these synergies, electrification should be more explicitly integrated into Europe’s energy security strategy. The first step would be to incorporate the gas-to-electricity price ratio – a major predictor of consumer preferences for one carrier or another – into energy security assessments, make the barriers to electrification more visible to policymakers and encourage action to be taken to remove them. In addition, generation and demand steering equipment will become critical infrastructure if massively deployed in a highly electrified energy system. Both need close EU-level monitoring and regulation. Importantly, grid development and end-use electrification must be carefully coordinated, as the former is necessary for the secure operation of a highly electrified system while the latter is essential to give appropriate investment signals for grid reinforcement. 

The next steps would involve reforming taxes and network charges, phasing out fossil fuel subsidies and rolling out the ETS 2 – a carbon pricing scheme covering gas- and oil-intensive sectors such as buildings, transport and small enterprises. Rebalancing the price ratio in favour of electricity by adjusting taxes and network charges should be a key focus of the Commission’s forthcoming Electrification Action Plan and its dialogue with Member States under existing EU monitoring and governance frameworks. Flanking instruments such as subsidies for rolling out electrification technologies are warranted. For industry, policies that support electrification should include a direct industrial electrification alliance to help match supply and demand, and introduce phase-out targets for fossil-fuelled appliances initially focused on low- and medium-temperature heat to ensure demand visibility, as well as subsidy schemes covering the short-term cost gap – in order to avoid the energy security liabilities that would be caused by another wave of investment in fossil fuel appliances. 

In the mid-transition, a distinct set of challenges for the EU’s domestic and external energy security is set to emerge. These challenges relate to the functioning of a more electrified and digitalised energy system, the emergence of new material and clean energy interdependences and the decline of fossil fuel interdependences.

Overall, these challenges are more manageable for Europe than those more closely associated with a fossil fuels-based energy order. Notably, they require domestic action and policy measures in areas where the EU has important power resources – in contrast to its more fragmented agency in securing foreign fuel supplies.

However, to effectively navigate an energy order shaped by technological change and geopolitical uncertainty such as that which characterises the mid-transition, the EU’s energy security concept requires modernisation. According to the International Energy Agency’s widely cited definition, energy security means the “uninterrupted availability of energy sources at an affordable price” (IEA, n.d.). This view is echoed in foundational EU policy documents such as the European Energy Security Strategy of 2014 (European Commission, 2014), which reflects a supply-centric, static and foreign fuels-focused approach. By contrast, a concept adapted for the mid-transition requires three main characteristics: systemic, dynamic and focused on resource-resilience.

Systemic – Traditional energy security has prioritised access to large volumes of fossil fuels at affordable prices. However, energy carriers are not an end but a means of delivering energy services. Given that electrification, renewable energy and efficiency measures reduce and alter the total amount of primary energy required to meet these needs, security should be redefined in terms of securing energy services to final consumers rather than specific fuel supplies. It should incorporate the role played by both the demand and the supply side. A future-proof energy security concept must adopt a system perspective that values low vulnerability at the systemic level. This approach involves a broader range of policy areas encompassing trade, development aid, industrial, defence and digital policy, alongside more traditional energy policy tools, bringing to the fore the challenge of policy integration as these policy areas have their own set of competing incentives.

Dynamic – Europe is entering the most complex phase of its energy transition. Energy security must therefore evolve into a dynamic concept that anticipates vulnerabilities and adapts accordingly. In this evolving context, not all redundancies are equal. Investments in fossil infrastructure provide counterproductive incentives to final users and economic actors and may soon prove obsolete, as RES and electrification can rapidly reduce gas demand. By contrast, carefully targeted redundancies in clean energy, such as transmission upgrades, battery storage and digital controls, increase energy security and are likely to prove essential over time. Dynamic energy security requires emerging gaps to be identified early on and temporary challenges to be differentiated from structural shifts. The growing reliance on electricity for heating for example will reduce gas needs while simultaneously increasing seasonal and weekly fluctuations in electricity demand. System-wide foresight and investment can help address this. 

Focused on resource-resilience – Since 2022, the external dimension of the EU’s energy security policy has been driven by the urgent need to reduce dependence on Russian gas imports. While short-term supply diversification addressed immediate vulnerabilities, it did not reduce structural import dependencies. A resource-resilient approach reduces exposure to geopolitical shocks by enhancing the EU’s capacity to meet its energy needs with domestic renewable energy sources. This entails developing robust supply chains that leverage strategic partnerships and the growing share of critical material stocks already embedded in EU energy systems. In summary, a resource-resilient energy system is one that is less dependent on any single external actor, more capable of absorbing shocks and more autonomous in achieving its energy objectives. 

Energy security in the 21st century must move beyond the legacy of fossil fuel supply and embrace a more integrated, forward-looking framework. A systemic, dynamic and resource-resilient approach provides the foundations for a secure, sustainable and autonomous energy future. This shift is not only about reacting to crises. It is about building a system capable of thriving in the face of rapid technological, environmental and geopolitical change.

1 As originally defined by Gruber and Hastings-Simon, the mid-transition period is defined as “the time span during which low-carbon and fossil-based energy and industrial socio-technical regimes are both undergoing rapid transformation, co-exist on a large scale, and operate in a highly contested space, which causes new or exacerbates existing instabilities and volatility of global energy markets, with knock-on effects on the global economy” (Grubert and Hastings-Simon, 2022). In the EU context, which constitutes the geographical scope of this paper, we consider this phase to mean spanning the period 2025 to 2045, based on existing policy frameworks.

2 The black start capacity refers to a power generation unit’s ability to restart after a complete shutdown without external sources.

3 Assumed gas prices based on 2023 TTF price: 41.40 euros per MWh.

4 Modelled final energy consumption includes ambient and waste heat; fuel consumption includes both energy and non-energy use.

5 Regulation (EU) No. 994/2010 on security of gas supply requires Member States to comply with the infrastructure standard (N-1 formula). The N-1 formula is used to estimate whether the gas infrastructure in an area of study has sufficient technical capacity to satisfy total gas demand in the event of disruption of the single largest gas infrastructure during a day of exceptionally high gas demand occurring with a statistical probability of once in 20 years. To comply with the standard, a result equal to or greater than 100% is required.

6 Under current policy scenarios and investment pipelines, the global LNG market may become tight again between 2035 and 2040, and undersupplied thereafter (IEA, 2024).

7 Scenarios range from the Fit for 55 scenario with 40% RES deployment to a RePowerEU scenario with 45% RES deployment. Intermediate scenarios include RePowerEU with the REDIII target of 42.5% RES deployment and Agora’s own GEXIT scenario (Source: Ares (2022) 4520846, “Non paper on complementary economic modelling undertaken by DG ENER analysing the impacts of overall renewable energy target of 45% to 56% in the context of discussions in the European Parliament on the revision of the Renewable Energy Directive”; Agora Energiewende, 2022).