Europe’s dependence on imported fossil fuels, volatile energy prices and geopolitical risks is putting energy security at the center of economic and industrial policy. For businesses, the cost and reliability of electricity are becoming increasingly important factors in competitiveness and investment decisions.

EU Plans To Double Electricity’s Share By 2040

Against this backdrop, the European Commission unveiled the Electrification Action Plan on July 17, 2026, as part of the Clean Industrial Deal and Affordable Energy Action Plan.

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Electricity currently accounts for about 23% of final energy consumption in the European Union and around 26% in Cyprus. The Commission aims to raise that share to about 46% by 2040, reducing reliance on fossil fuels and increasing the use of renewable electricity.

Brussels estimates that reaching the target could reduce fossil fuel imports by about €260 billion a year. The plan covers transport, buildings and industry, where electrification is expected to replace part of the current use of oil and natural gas.

Electrification To Expand Across Transport And Industry

The plan supports wider adoption of electric vehicles, heat pumps and other electric heating technologies. Industry would also increase the use of electric boilers, furnaces and industrial heat pumps.

Electrification will not be practical for every industrial process, however. In sectors where direct electrification remains technically or economically difficult, the Commission expects green hydrogen and other low-carbon fuels to play a complementary role.

Grids And Storage Are Key To The Transition

Higher electricity demand will require upgrades to Europe’s transmission and distribution networks. The Commission’s Grids Package is intended to accelerate grid investment, improve cross-border interconnections, expand smart metering and support digitalisation.

Energy storage will also become more important as renewable generation expands. Storage and hydrogen technologies can help manage fluctuations in renewable output, while demand-side management, energy communities and digital systems are expected to improve how electricity is produced and consumed.

Electricity Prices Will Shape The Pace

The Commission’s plan also focuses on the cost of electricity. Electrification is less likely to advance if electricity remains more expensive than competing fossil-fuel alternatives.

Proposed measures include reviewing network charges, using revenue from the Emissions Trading System more effectively, developing new financing tools and providing targeted incentives for investment in electric technologies.

Cyprus Faces A Different Set Of Constraints

For Cyprus, electrification could reduce exposure to imported fuels and support energy security, but the transition faces several infrastructure challenges. High electricity costs, strong solar generation and constraints around grids and storage will require additional investment as electricity takes a larger share of final energy demand.

The Federation of Employers and Industrialists (OEB) has been following European energy initiatives and contributing to discussions on their implications for businesses. The organisation has argued that electrification will require competitive electricity prices, modern infrastructure and predictable regulation to support private investment.

For Cyprus, the pace of electrification will therefore depend not only on the availability of renewable power, but also on grid investment, storage capacity, electricity prices and the regulatory framework for businesses.