EU targets 46% electricity share by 2040 under new Electrification Action Plan

European Commission sets 46% electricity target for 2040

The European Commission published its Electrification Action Plan on 17 July 2026. The document sets an indicative target for electricity to account for 46% of the EU’s final energy consumption by 2040. This represents nearly double the current share of 23%.

The plan forms part of the Commission’s broader strategy to reduce fossil fuel dependency across transport, industry and buildings. However, the 46% figure remains indicative rather than legally binding at this stage. A formal impact assessment will follow as part of the post-2030 Energy Union package, expected in the fourth quarter of 2026.

For UK businesses trading with EU markets or operating European subsidiaries, these targets will influence regulatory standards, supply chain requirements and investment priorities across the continent. Understanding the plan’s scope helps businesses anticipate changes in European procurement criteria and technical specifications.

What the plan requires from EU member states

Reaching the 46% electrification target demands progress nine times faster than the annual increase seen since 1990. The Commission’s draft plan identifies specific measures needed to achieve this acceleration.

Transport must see substantial growth in electric vehicle deployment. Buildings will require widespread replacement of gas boilers with heat pumps. Industrial processes need electrification alongside adoption of clean technology. Meanwhile, Europe’s ageing power grids must undergo extensive upgrades to handle increased demand.

Energy storage receives particular emphasis in the plan. The infrastructure requirements are considerable. Member states will need to invest heavily in grid capacity and storage solutions to support the projected surge in electricity consumption.

The Commission estimates that meeting the 46% target would cut the EU’s annual fossil fuel import bill by €260 billion (approximately £222 billion) by 2040. This reduction aims to enhance energy security while decreasing dependency on imported oil and gas.

The action plan arrives alongside a revision of the EU Emissions Trading Scheme. The Commission intends these measures to work together, strengthening industrial decarbonization whilst maintaining competitiveness. Nevertheless, industry groups have questioned whether the targets go far enough.

Eurelectric, representing the electricity sector, previously advocated for an indicative target of 35% by 2030 and 50% by 2040. The Commission had earlier referenced a 32% electrification target by 2030 under the Clean Industrial Deal. The final 46% figure for 2040 sits between these positions.

Price concerns and taxation reforms under consideration

High electricity prices present a significant challenge to the plan’s viability. Critics note that electrification targets may struggle if power costs remain substantially higher than fossil fuel alternatives. The Commission acknowledges this issue in the plan.

Proposals include revising the Energy Taxation Directive to lower electricity taxes. The aim is to improve the price ratio between electricity and fossil fuels, making electrification economically attractive for businesses and households. Tax reforms and removal of certain levies are under consideration.

For UK manufacturers exporting to EU markets, these pricing dynamics matter. If electricity costs fall relative to fossil fuels across Europe, this could shift competitive advantages between production methods. Companies relying on gas-intensive processes may face growing cost pressure compared to electrified alternatives.

The public consultation phase for the Electrification Action Plan concluded in November 2025. The Commission also consulted on an accompanying Heating and Cooling Strategy during the same period. Stakeholder feedback from these consultations informed the final plan published in July 2026.

Commercial implications for UK businesses with EU exposure

UK businesses operating in European markets should monitor how member states implement these electrification targets. Although the 46% figure remains indicative for now, it will likely influence national policies, building standards and industrial regulations across the EU.

Several sectors face particularly direct effects. Automotive suppliers will see continued pressure for electric vehicle components and charging infrastructure. Construction firms working on European projects may encounter stricter requirements for heat pump installation and building electrification. Industrial equipment manufacturers could find growing demand for electric alternatives to gas-powered machinery.

Supply chain considerations extend beyond direct sales. UK firms tendering for European public contracts may face procurement criteria linked to electrification goals. Demonstrating compatibility with these targets could become a competitive requirement, similar to how carbon reporting compliance already influences tender outcomes under PPN 06/21 in the UK.

Energy-intensive UK manufacturers with European operations face strategic decisions. If electricity prices fall through taxation reforms whilst gas costs remain high or rise further, the economics of production locations may shift. Some businesses might need to reassess where certain processes are based, particularly if EU member states offer incentives for electrified production.

The nine-fold acceleration in electrification rates required by the plan suggests rapid regulatory and market changes ahead. Consequently, businesses should factor these timelines into capital investment decisions. Equipment purchased now may need compatibility with increasingly electrified European standards throughout its operational life.

Heat pump manufacturers and installers may find expanded opportunities as EU member states phase out gas boilers. However, skills gaps and supply chain capacity could constrain delivery. UK businesses in this sector should consider whether they have the workforce and supplier relationships to scale up if demand accelerates.

Grid infrastructure requirements create opportunities in power distribution equipment, energy storage systems and smart grid technology. The Commission’s emphasis on grid upgrades and storage solutions points to sustained investment in these areas. UK companies with relevant capabilities might explore partnership or supply arrangements with European infrastructure developers.

Eight essential points about the EU electrification target

• The European Commission published its Electrification Action Plan on 17 July 2026 with an indicative target of 46% electricity share in final energy consumption by 2040.
• This target nearly doubles the current EU electrification rate of 23% and requires progress nine times faster than the annual increase since 1990.
• Achieving the target could reduce the EU’s annual fossil fuel import bill by €260 billion by 2040, enhancing energy security.
• The 46% figure remains indicative rather than legally binding, subject to formal impact assessment in the fourth quarter of 2026.
• Implementation requires massive deployment of electric vehicles, widespread heat pump adoption replacing gas boilers, and extensive power grid upgrades.
• The Commission plans to revise the Energy Taxation Directive to improve electricity pricing relative to fossil fuels and support electrification economics.
• The action plan accompanies a revision of the EU Emissions Trading Scheme aimed at strengthening industrial decarbonization and competitiveness.
• Industry groups had advocated for higher targets of 35% by 2030 and 50% by 2040, suggesting some stakeholders view the Commission’s targets as insufficient.

Strategic considerations for businesses with European operations

The electrification plan represents a clear policy direction even whilst detailed implementation remains under development. UK businesses should treat the 46% target as a signal of regulatory trajectory rather than waiting for legally binding obligations to emerge.

Companies with long equipment replacement cycles face particular planning challenges. Industrial machinery, building systems and fleet vehicles purchased today will likely operate in a very different regulatory environment by the end of their useful lives. Therefore, investment decisions should account for potential obsolescence of gas-dependent equipment.

Businesses might review their European property portfolios to assess heating system replacement timelines. If gas boiler phase-outs accelerate across member states, early adoption of heat pumps could avoid later compliance costs or restrictions. Similarly, fleet operators should model different electric vehicle adoption scenarios against fuel cost projections.

The emphasis on grid infrastructure and energy storage suggests opportunities beyond direct electrification. Professional services firms with expertise in energy project management, grid connection processes or storage system integration may find growing demand. Training programs on energy systems could help businesses build relevant capabilities.

UK manufacturers should monitor how the revised Energy Taxation Directive develops. Changes to electricity taxation across the EU could alter the economics of energy-intensive processes. Businesses may need to revisit make-versus-buy decisions or production location strategies if power costs shift significantly.

For companies already working towards net zero commitments, the EU’s electrification targets align with carbon reduction strategies. Firms can leverage existing decarbonization work to meet emerging European requirements. Our ESG compliance support helps businesses align internal sustainability programs with evolving regulatory frameworks.

Supply chain resilience deserves attention as electrification accelerates. The plan’s ambitious timescale may strain supplies of heat pumps, electric vehicles and grid equipment. UK businesses should assess their exposure to potential bottlenecks in these areas and consider whether supplier diversification or early procurement makes sense.

The Commission’s approach of setting indicative targets before formal legal requirements provides a window for preparation. Businesses that act during this period may gain advantages over competitors who wait for mandatory obligations. Early movers can secure favorable equipment pricing, develop operational experience and position themselves as credible suppliers to electrifying markets.

Where to find detailed information and guidance

The European Commission publishes official documentation on the Electrification Action Plan through its energy policy pages. The European Commission Energy website provides access to the full plan text, supporting documents and impact assessments as they become available.

Businesses should monitor the post-2030 Energy Union package expected in the fourth quarter of 2026. This package will include the formal impact assessment determining whether the 46% target becomes legally binding. The Commission typically announces such publications through its press release service.

The International Energy Agency produces analysis of European electrification trends and policy developments. Their reports offer context on how EU targets compare to global patterns and technical feasibility assessments.

UK businesses operating in specific sectors should consult relevant European industry associations. These bodies often provide member guidance on preparing for regulatory changes and may offer early sight of implementation timelines in different member states.

For companies assessing how European electrification targets interact with UK sustainability requirements, the Department for Energy Security and Net Zero publishes guidance on UK policy directions. Understanding both UK and EU trajectories helps businesses develop coherent strategies across markets.