Powering Europe’s industry

For industries that have not yet electrified their processes, power represents only up to 5 percent of total production costs, whereas fossil fuel expenses account for 30 to 80 percent. When considering energy costs, those sectors that strongly depend on fossil gas face most competitiveness challenges. Electrifying industrial processes with clean domestic energy would make Europe more resilient and cut the 380-billion-euro fossil fuel import bill.

Technologically feasible and in many cases economically viable, electrification will reshape energy consumption, even though large differences among industries will remain. Electricity will directly and indirectly account for 60 to 100 percent of total energy use in most sectors by 2035, with power costs representing 10 to 90 percent of production expenses, depending on the energy intensity of the process.

In many cases, like low-temperature heat and primary aluminium, effective carbon pricing through the EU Emissions Trading System (EU ETS) and Carbon Border Adjustment Mechanism (CBAM) could ensure cost-competitiveness. For other sectors, targeted power price support may be needed but should be conditional on clean investment. Across all sectors, further industrial policies will likely be necessary to address non-energy barriers.

To avoid policy fragmentation, the Electrification Action Plan should establish a unified framework to cut power system costs and ensure stable, competitive electricity prices, notably via contracts for difference (CfDs) and power purchase agreements (PPAs). Combining it with carbon pricing and Clean Industrial Deal policies such as lead markets would help build a resilient, climate-neutral European industry.