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Europe has made a “major mistake” by failing to wean its economy off imported fossil fuels quickly enough since the 2022 energy crunch, the head of the International Energy Agency has warned, as the EU prepares to roll out measures to increase electrification next week.
Fatih Birol said that Europe’s low electrification rate — electricity’s share of the energy consumed in the EU — of around 23 per cent is holding back the bloc’s competitiveness and economic “sovereignty”. The EU’s rate is similar to major oil producers such as the US despite its heavy reliance on imports of hydrocarbons.
“This is in my view a major mistake for Europe,” Birol told the FT. “In general, I would have hoped and expected that Europe would have been more responsive to this crisis.”
In a joint interview with Europe’s energy commissioner Dan Jørgensen, both leaders said that Europe needed to electrify its economy faster after facing two energy crises in less than five years. Europe should seek to emulate countries such as China, Japan and South Korea, which have an electrification rate of more than 30 per cent, Birol said.
The EU has pledged to raise this rate to 32 per cent by 2030 but the comments come as Jørgensen prepares to lay out a longer-term target to boost electrification by 2040. “Our electrification rate has stagnated for the last decade . . . We need to electrify and we need to do it much faster,” he said.
The Danish commissioner argued that the EU had deployed more renewables, increased energy efficiency and lowered gas consumption by 20 per cent in 2022, when Russia dramatically reduced pipeline supplies of gas — but the bloc’s heating, transport and industrial sectors remain reliant on fossil fuels.
Jørgensen acknowledged this continued reliance on imports meant the region had still been hit hard by the global disruption to oil and gas supplies caused by the Middle East conflict.
The Commission will lay out plans next week to require countries to lower taxes on electricity and offer support to encourage households to adopt heat pumps, electric cars and other green technologies.
A draft document of the proposal, seen by the FT, underlines that there are only two member states where electricity is less than twice as expensive as gas for industries: Sweden and Finland.
The plan will seek to boost electrification by introducing incentives so that electricity costs are no more than 2.5 times gas prices for households and 2 times for industry by 2030. This would be achieved partly by mandating that electricity is taxed less heavily than fossil fuels.
This should encourage individuals to install heat pumps and buy electric vehicles, while also providing industries with a stronger economic case to decarbonise, the document states.
But the measures could prove expensive for countries that are heavily reliant on taxation stemming from electricity bills. Greece, Italy, Hungary and Ireland have some of the highest electricity to gas price ratios.
Levies to fund grids and other charges are often added to electricity bills.
Birol also warned that ongoing issues with grid capacity were holding back the EU’s electrification push. Hailing a “record” year of 85GW of renewable installation last year as “very good news”, he said that 600 gigawatts of renewables were already finished and in the queue for a grid connection.
Much of the grid congestion in Europe stems from problems at a national or regional level, as countries struggle to adapt to lots of renewable power projects, sometimes in remote locations, generating electricity rather than a smaller number of very large fossil fuel plants that are often closer to industrial centres and households.
“Member states already tomorrow can speed up the process of expanding their grids and using the ones that we have more efficiently,” Jørgensen added.
