Nov 24, 2025
Europe's elevated electricity costs jeopardize decarbonization objectives.
Europe's energy crisis is deepening the cost disparity with global competitors and hindering the transition to electrify homes, transportation, and heavy industry.
Morningstar's recent Electrification Observer reports that high electricity prices are affecting the chemicals, steel, and other traditional sectors, while households and businesses face challenges in adopting low-carbon technologies.
Tancrede Fulop, a senior equity analyst at Morningstar, stated, "Europe is in a challenging position, as its economy bears much of the cost of decarbonization. Electricity prices remain excessively high, making technologies like heat pumps unaffordable and weakening the continent's competitiveness relative to China and the US."
Currently, only 23% of Europe's energy consumption is electrified, with a projected rise to just 25% by 2030, falling short of the 32% needed to meet EU climate objectives.
This gap may heighten political pressure to postpone significant policies, such as the 2026 end of free industrial carbon allowances and the 2027 introduction of carbon pricing for residential heating.
Electrification rates also differ significantly across the region.
Morningstar anticipates a slow growth in electricity demand of 1.1% annually in the EU until 2030, which is lower than the 1.4% expected in the US.
Consumption is expected to barely surpass 2019 levels, jeopardizing goals to stimulate the economy via electrification.
Data centers will contribute to rapid demand growth of 15% per year through 2030.
Northern Europe, France, and Iberia are poised to attract more data centers and industrial decarbonization initiatives, though much of this seems already reflected in the market following substantial gains by Spanish utilities.
Morningstar's 2030 electricity consumption projection is 8% below consensus estimates due to cancellations in green hydrogen projects and Europe's deindustrialization, with EU chemical output expected to decline by 10% by 2030.
The forecast for green hydrogen production is only 0.6 megatons by 2030, significantly below the EU's 10 Mt target, though Air Liquide is viewed as an attractive investment.
Europe's electrification rate is expected to reach just 25% by 2030, resulting in a 43% reduction in emissions from 1990 levels, falling short of the EU's 55% target.
Electrification in transportation will remain limited.
Electric vehicles (EVs) are projected to account for 45% of car sales by 2030, but only 5% of transportation energy use will be electrified, leading to a mere 5% reduction in total CO₂ emissions.
Morningstar's recent Electrification Observer reports that high electricity prices are affecting the chemicals, steel, and other traditional sectors, while households and businesses face challenges in adopting low-carbon technologies.
Tancrede Fulop, a senior equity analyst at Morningstar, stated, "Europe is in a challenging position, as its economy bears much of the cost of decarbonization. Electricity prices remain excessively high, making technologies like heat pumps unaffordable and weakening the continent's competitiveness relative to China and the US."
Currently, only 23% of Europe's energy consumption is electrified, with a projected rise to just 25% by 2030, falling short of the 32% needed to meet EU climate objectives.
This gap may heighten political pressure to postpone significant policies, such as the 2026 end of free industrial carbon allowances and the 2027 introduction of carbon pricing for residential heating.
Electrification rates also differ significantly across the region.
Morningstar anticipates a slow growth in electricity demand of 1.1% annually in the EU until 2030, which is lower than the 1.4% expected in the US.
Consumption is expected to barely surpass 2019 levels, jeopardizing goals to stimulate the economy via electrification.
Data centers will contribute to rapid demand growth of 15% per year through 2030.
Northern Europe, France, and Iberia are poised to attract more data centers and industrial decarbonization initiatives, though much of this seems already reflected in the market following substantial gains by Spanish utilities.
Morningstar's 2030 electricity consumption projection is 8% below consensus estimates due to cancellations in green hydrogen projects and Europe's deindustrialization, with EU chemical output expected to decline by 10% by 2030.
The forecast for green hydrogen production is only 0.6 megatons by 2030, significantly below the EU's 10 Mt target, though Air Liquide is viewed as an attractive investment.
Europe's electrification rate is expected to reach just 25% by 2030, resulting in a 43% reduction in emissions from 1990 levels, falling short of the EU's 55% target.
Electrification in transportation will remain limited.
Electric vehicles (EVs) are projected to account for 45% of car sales by 2030, but only 5% of transportation energy use will be electrified, leading to a mere 5% reduction in total CO₂ emissions.