Smooth progress on the EU’s energy transition is not guaranteed, and political and market-related risks abound. But for each potential objection to the transition, our analysis still leads to the inescapable conclusion that renewables and electrification offer the most logical and effective solution to the EU’s energy security challenge.
The EU made substantial headway with its energy transition during the first term (2019–24) of European Commission President Ursula von der Leyen, with positive results for the bloc’s energy security. During the first year of her second term, there has been an impressive array of plans and packages designed to embed and advance that transition; these have included the Clean Industrial Deal, the Action Plan for Affordable Energy, the REPowerEU roadmap and the European Grids Package.
The EU is on track to reduce gas demand to 1,615 TWh a year by 2030, in line with the ambitious target of the 2022 REPowerEU plan – this level of aggregate demand could, in theory, be satisfied by existing domestic production and pipeline imports, with no LNG imports required.
Growth in wind and solar generation on the supply side, and in the market penetration of heat pumps on the demand side, has been steadily pushing up the share of renewable sources in total EU energy consumption – albeit at a slower pace than is needed to meet the revised Renewable Energy Directive target of at least 42.5 per cent by 2030.
Continued progress is far from guaranteed, however. The European Commission’s ambition is not shared by all member states: there is growing resistance in some capitals to various aspects of the Green Deal policy programme, amid fears that such policies risk hurting industry and pushing up energy prices. Indeed, with energy prices stubbornly high, and industrial competitiveness a widespread concern, the possibility of lower prices provides a seductive rationale for reopening Russian gas pipelines in the event of a negotiated settlement to the conflict in Ukraine. European auto giants, and member states such as Germany and Italy, successfully lobbied the commission to water down the EU’s planned 2035 ban on sales of internal combustion engine vehicles, a development that – if agreed by the European Parliament and national governments – could slow the electrification of road transport and prolong the EU’s exposure to volatile international oil prices. Efforts to dilute planned reforms to the EU’s compliance carbon market, including by some actors within German industry, risk depriving member states of crucial revenue to invest in renewable energy and electrification.
Until 2029 at the earliest, the European Commission and member states can expect to come under pressure from the US administration in Washington, and from US energy companies, to buy more American energy exports. It will be challenging, to say the least, to meet the commitment to massively ramp up spending on fuels from across the Atlantic in a way that is not inherently detrimental to the EU’s energy security. Such a commitment risks sharply increasing reliance on one country and absorbing fiscal resources that might otherwise be directed at the technologies and infrastructure needed for a more secure energy system. Much depends on how strictly the $750 billion spending pledge is enforced by the US, and on the coercive tools the US administration is prepared to apply. As the distinctly one-sided US–EU trade deal made painfully clear, the US retains considerable leverage over the EU, with the power to hike tariffs and reduce security commitments.
The extent to which low-carbon technology supply chains are implicated in trade turbulence, or become collateral damage, represents another critical uncertainty in the EU’s transition. European industry is experiencing ever stronger competition from China across a growing range of sectors, which suggests that tensions between the two trading powers are unlikely to subside in the near future. Trade defence investigations, in both directions, have proliferated in recent years. Measures by the EU to protect domestic industry from Chinese imports could constrain the supply of lowest-cost low-carbon technologies, slowing the transformation of the energy system and making that transformation more expensive. Chinese export controls on raw materials, components or production technologies could hurt the EU’s ability to manufacture its own equipment.
Structural shifts in global energy markets, in combination with adverse macroeconomic conditions, could dampen the economic rationale for the shift to renewables. In the case of gas and oil, if global demand begins to fall while supply remains robust, all else being equal, there may be extended periods of lower prices, encouraging greater usage by consumers, and complacency among policymakers. In the case of renewable energy deployment, if supply chains tighten and interest rates increase, the total cost of projects will be driven up, reducing their appeal for developers and increasing costs for consumers.
None of the above, however, alters the underlying energy security case for the EU making an accelerated shift to a system based on renewables and electricity. Proven reserves of oil and gas across the 27 member states fall far short of current aggregate demand, and prospects for new extraction are limited by both geology and economics. This translates into a heavy structural reliance on imports, exposing the EU to supply shocks and price risks associated with international energy markets. This dependence on fuels, especially gas, from countries which may not share the EU’s goals and may be actively hostile to them constrains the EU’s ability to exercise its prized ‘strategic autonomy’. Such dependence also threatens the EU’s status as a regulatory superpower, as evidenced by the suggestion from the US and Qatari energy ministers that their energy companies may no longer export LNG to the EU if corporate sustainability rules are not rolled back.
Dependence on fuels, especially gas, from countries which may not share the EU’s goals and may be actively hostile to them constrains the EU’s ability to exercise its prized ‘strategic autonomy’.
Reducing the dependence on imported fossil fuels, gas in particular, requires scaling up the use of energy from other sources. Nuclear power is a crucial part of the EU’s energy mix, accounting for nearly a quarter of electricity generation in 2024, and some consider increasing this share to be the most promising path to greater energy security. This ambition is, however, constrained by the extremely high costs and long, uncertain timeframes characteristic of new nuclear builds, and by the fact that most of the EU’s existing nuclear power plants are reaching the end of their operational life. In the coming decades, simply maintaining the current level of generation capacity will prove challenging.
This leaves renewable energy, which in recent years has seen strong growth in the EU. Renewables are primarily associated with mitigating climate change, but there is increasing recognition of their role in energy security. It is harder for an adversary to disrupt a large, distributed network of machines converting wind and sun into electricity than it is to close a pipeline or cause LNG or oil shipments to be redirected. It is also more difficult and less cost-effective to destroy thousands of wind turbines and solar panels than it is to use a missile to knock out a single power plant. As renewable energy technology costs have fallen, so too has the cost of the electricity they produce, and renewables – which unlike fossil fuels, produce at zero marginal cost – are generally the most economic option. Wind and solar, with variable but predictable output, also offer an opportunity to escape the price volatility of internationally traded fossil fuels.
But as this paper has argued throughout, growth in renewable energy production must be accompanied by growth in electrification, whereby energy services conventionally provided by fossil fuels are provided by electric alternatives, and grids are expanded and upgraded, making the electricity system the basis of the energy system to a much greater degree. Electrification can enhance energy security through more efficient use of energy resources: EVs use half the energy of their internal combustion engine counterparts, and digitized electricity grids permit the deployment of demand-response technologies that enable smarter management of supply. Crucially for energy security, electrification means that energy needs, such as transport and heating, currently met largely by imported fossil fuels can be fulfilled by domestic renewables instead.
A larger role for electricity comes with its own set of challenges for the EU. Ensuring ‘electricity security’ (see Box 2) as the system grows will require coordinated system-level planning to manage the variability of renewable energy generation, with increased deployment and use of flexibility assets such as battery storage. It will also require increasing the capacity of interconnectors that allow national grids to trade electricity – among EU member states, as well as with neighbours such as Norway and the UK – without creating new dependencies. The central challenge will be ensuring the integrity of the electricity delivery network: essentially, ensuring that there are no blackouts. Grids will need to expand in line with additions of renewable generation, with sufficient dispatchable capacity (battery storage and, in the short and medium term, gas-fired power) available when needed. Physical infrastructure must be made resilient to sabotage and the worsening impacts of climate change; digital infrastructure will need to be resilient to cyberattacks.
Moving towards greater energy security through renewables and electrification will require decisive action across several fronts. This paper has identified a non-exhaustive set of priority actions, across four categories (see Chapter 3), that will help to make pursuit of energy security – in the fullest sense – a strategic guiding principle for the EU as it navigates an uncertain future. The challenges, especially fiscal challenges, will be substantial: the costs of a transition from fuels to infrastructure and technologies are inevitably frontloaded. But the EU must find a way to make the investments needed today to build the lower-cost energy system of tomorrow – one that is more efficient, resilient and secure.
