The energy transition in Europe is an inescapable reality with a clear objective: to achieve a zero-emission economy without dependence on fossil fuels. In this challenge, the electrification of energy demand becomes a fundamental pillar. Without a shift towards the predominant use of clean electricity, it will be virtually impossible to meet the climate targets that have been set. Indeed, 2024 is on track to be a critical milestone, as the global average temperature will exceed the 1.5°C threshold for the first time.
According to the latest data from the European Union (EU), renewables account for only 23.0% of gross final energy consumption and 41.2% in the electricity sector. While this progress is significant, much remains to be done to meet decarbonisation targets and complete the energy transition. This requires a deep transformation of the energy matrix, with the aim of achieving 70% electrification by 2030 and 100% by 2050.
To achieve this goal, it is imperative that electricity demand growth is treated as a strategic priority. The EU must focus on stimulating significant growth in electricity consumption to meet the needs of rapidly changing sectors such as electric mobility, data centres, green hydrogen production and industrial processes. In this context, electricity demand is expected to grow by 30-40% over the next decade, an essential step not only to reduce emissions but also to ensure a modern energy infrastructure ready for future challenges.
Key sectors such as mobility and industry will be key players in this gradual but disruptive change. The rise of electric vehicles will become inevitable once their costs align with those of combustion vehicles, a phenomenon already witnessed in the solar energy sector. In the industrial sector, the electrification of thermal processes and the integration of hydrogen into processes that are difficult to electrify will help to increase electricity demand. The growing prominence of data centers, which are already consuming significant amounts of electricity, is also noteworthy. These hubs, crucial to the present and future of our society, are expected to see a substantial increase in energy consumption. In the domestic sphere, technologies like heat pumps will play a pivotal role in replacing traditional heating systems, especially if government incentives are introduced to encourage their adoption. If these advancements take hold, renewable energy sources could account for at least 50% of gross energy consumption by 2040.
However, this path toward the electrification of demand is not without its challenges. It will not be an immediate process, but a transition that will take at least a decade. To manage this growth, it will be essential to modernise existing transmission and distribution networks to support higher energy loads. In addition, advanced storage technologies, such as BESS batteries, will be key to balancing supply and demand.
Technological innovation will also play a key role in the success of electrification. Smart grids allow real-time management of electricity flows, optimising distribution and improving the reliability of the electricity system. They also facilitate greater integration of intermittent renewable sources such as solar and wind, and allow users to become prosumers, i.e. producers and consumers of energy, creating a more dynamic and decentralised system. For its part, the implementation of artificial intelligence and big data in these networks will make it possible to predict consumption and generation patterns, reducing losses and increasing the operational efficiency of the electricity system.
To accelerate the electrification of demand, the EU could draw inspiration from Asian models that are leading the energy transition through massive investments in renewables, energy storage and advanced infrastructure. China, for example, is rapidly integrating clean energy and innovative technologies to electrify key sectors such as transport. Europe has the opportunity to adapt these lessons to its own context by removing regulatory barriers and fostering closer cooperation between governments and the private sector.
Ultimately, the electrification of energy demand must be the cornerstone of Europe’s strategy for a successful energy transition. Decoupling the energy matrix from dependence on fossil fuels is an urgent necessity and will only be possible with a strong commitment from governments to facilitate the expansion of renewable generation capacity. This means streamlining administrative processes, investing in critical infrastructure and providing incentives to encourage the electrification of residential and industrial consumption. Accelerating electrification is key not only to meeting decarbonisation targets, but also to ensuring a sustainable, resilient and zero-emission economy.
Authored by: Jordi Francesch, Managing Director of Asset Management at Nuveen Infrastructure and a member of the board at Verdian
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