Electrification is increasingly recognized as a key component in achieving the European Union’s goals for energy security, affordability, competitiveness and emissions reduction. The recent closure of the Strait of Hormuz underscored the risks of relying heavily on imported fuels, strengthening the case for a shift toward electric technologies.
Currently, about 70% of EU electricity generation comes from domestic, low-emission sources. Yet industry, buildings and transport obtain less than one quarter of their energy from electricity. Roughly two-thirds of end-use energy still depends on fossil fuels, more than 80% of which is imported. A cost-competitiveness analysis shows that, because electric technologies can be several times more efficient than conventional alternatives, they often break even at electricity-to-fuel price ratios above one.
Price ratios vary widely across and within EU countries, driven by historical energy system designs, taxation and resource availability. Countries with lower electricity-to-fuel price ratios tend to exhibit higher levels of electrification and per-capita electricity consumption. However, the point at which each technology becomes cost-competitive depends on the application. Electric vehicles and high-temperature industrial heat typically become competitive at price ratios between 1 and 2, while heat pumps for buildings and low-temperature industrial heat require ratios between 2 and 3.5.
Heat pumps lead the way for low-temperature industrial heat, with lifetime costs below gas boilers in 17 countries that account for 40% of low-temperature demand—and within 5% of parity in another 35% of demand. Residential heat pumps are already competitive in 16 countries, representing about one-third of the EU’s heating demand, with annual savings up to €800. Yet high upfront costs, infrastructure adaptations and grid connection delays remain barriers.
Battery electric vehicles are four to five times more energy-efficient than new combustion engines. Without subsidies, payback periods are under eight years in 11 EU countries; typical incentives of around €4,000 reduce this to three to five years in major markets. The growing number of affordable EV models and planned regulatory measures are expected to narrow the purchase price gap further.
Historic oil and gas crises have previously accelerated energy transitions. The current energy shock is already boosting savings from EVs by 35% compared to 2025 levels and driving 30% growth in electric car sales and 17% growth in heat pump installations in early 2026. Coordinated policies that address both fuel price competitiveness and non-financial barriers are critical to sustain this momentum.
Source: IEA Commentary: The energy crisis creates even stronger impetus for EU electrification
