Electrification & Industry in Europe

I recently came across an insightful article titled "Unlocking the Untapped Potential of Industrial Electrification" by Eurelectric .

While the power sector has made remarkable strides in reducing emissions, electrification is lagging behind. Since 2008, the power sector has achieved a 50% reduction in emissions, and in the first half of 2024, 74% of electricity generation came from renewables and nuclear sources. This demonstrates a significant shift towards cleaner energy.

But despite the progress made in decarbonizing the power sector (yeah!), the rate of electrification in Europe has remained stagnant at 23% for the past decade. This is particularly concerning when we consider the rapid advancements made by other regions, such as China, which has seen a 7 percentage point increase in electrification since 2015.

The European Commission has set ambitious targets, aiming for 50% electrification by 2040 and up to 70% by 2050. To achieve these goals, industrial customers, who currently represent a third of power demand, must play a pivotal role. Unfortunately, only 4% of industrial high-emission heating processes are currently electrified. This highlights a vast, untapped potential for increasing power demand and decarbonizing industrial processes.

So what is stopping us to electrify the industrial processes ? One issue is the decline in power demand due to the European industrial slowdown. Europe is facing an alarming rate of de-industrialisation which already led to 100 terawatt-hours of electricity demand drying up. This is equal to nearly the entire EU steel making industry!

Companies which haven´t closed down during the Covid 19 pandemic were hit hard (again) due to the war in Ukraine which caused sky rocketing gas prices and leading to higher electricity prices.

And while Europe is using the Green Deal legislation as a form of regulation (Stick) to achieve climate goals, China and the United States were subsidising their industries (Carrot).

The key takeaways for me in the article are:

1. Electrification as a Decarbonization Tool: The electrification process is essential to meet the European Commission's carbon emissions targets.
2. Stagnation in Electrification Rate: The electrification rate in Europe has stagnated at 23% over the past decade.
3. Industrial Sector's Role: The industrial sector holds significant potential to drive electrification but is under significant pressure from competition, rigid bureaucracy, high electricity and energy prices.
4. Power Sector Achievements: The power sector has made impressive progress, achieving a 50% reduction in emissions compared to 2008.
5. Insufficient Demand for Clean Power: Despite the progress in the power sector, the demand for clean and renewable power remains insufficient due to the alarming rate of de-industrialisation. The 7.5% decline in EU electricity demand between 2022 and 2023 highlights the need for measures to increase industrial demand for clean energy.

The article highlights the importance of industrial electrification in driving decarbonization and achieving Europe's climate goals. By unlocking the untapped potential of industrial electrification, Europe can increase power demand, incentivize investment in clean generation, and accelerate the transition to a carbon-neutral economy. This transition is not only essential for the environment but also for securing Europe's position as a leader in the global clean energy market.

What happened since 2024 ?

A European "Clean Industrial Deal" is coming in place on February 26th, 2025 !!!

It reflects the EU commitment to achieve carbon neutrality and maintaining industrial leadership and focus on diversification of energy supplies, expanding clean energy, financing, circular economy, job creation and pioneering decarbonization technologies.

What do you think: What else should Europe be doing to embrace more “carrots” than “sticks“?