In recent years, the European Union has been faced with an unprecedented energy crisis, which has highlighted the weaknesses of the European energy model. Dependence on imported fossil fuels, volatility in international energy prices and geopolitical developments have shown that energy security is not only an environmental or technical issue, but also a key factor for economic growth and competitiveness.
In this environment, the European Commission presented on 17 July 2026 the Electrification Action Plan, one of the most important initiatives of the Clean Industrial Deal and the Affordable Energy Action Plan. The new strategy is not limited to promoting the green transition. On the contrary, it aspires to be the new development model of Europe, utilizing electricity as the main energy carrier for transport, buildings and industry.
Today, electricity accounts for only 23% of final energy consumption in the European Union (in Cyprus the figure is around 26%), while the rest is still mainly based on fossil fuels such as oil and gas. With the aim of reducing dependence on imported fuels and enhancing competitiveness and energy security, the Commission aims to double the share of electricity in final consumption through the Electrification Action Plan, from 23% today to around 46% by 2040. According to its estimates, achieving this target could reduce fossil fuel imports by about €260 billion. while taking advantage of the ever-increasing production of electricity from renewable sources.
This strategy is based on the assumption that electrification is the most efficient way of decarbonisation for most of the economy. It provides for the acceleration of electrification in transport, the replacement of conventional heating systems in buildings with heat pumps and other electrical technologies, as well as the electrification of a significant part of industrial processes through electric boilers, electric furnaces and industrial heat pumps. At the same time, it is recognised that, in some sectors of industry, direct electrification is not yet technically or economically feasible and therefore green hydrogen and other low-carbon fuels will continue to play a complementary role.
The European Commission points out, however, that this transition cannot be made possible by more renewable energy sources (RES) alone. Equally crucial is the upgrading of the electricity grids, which are called upon to serve an ever-increasing percentage of energy demand. To this end, the Electrification Action Plan is accompanied by the Grids Package, which aims to accelerate investments in transmission and distribution networks, strengthen interconnections between Member States, install smart meters and digitalise the electricity system.
The role of energy storage is also crucial. The development of storage systems and hydrogen technologies is now considered a basic prerequisite for the effective utilization of RES production and for the provision of the necessary flexibility in the electricity system. At the same time, special emphasis is placed on digitalization, energy communities, demand management and the development of the necessary skills of human resources, recognizing that the energy transition is not only about new technologies, but also about new ways of producing, consuming and managing energy.
Perhaps the most important finding is that the transition to electrification cannot be accelerated if electricity remains more expensive than fossil fuels. To this end, the European Commission is proposing measures aimed at reducing the overall cost of electricity, through the revision of network charges, a more efficient use of the revenues of the Emissions Trading System (ETS), the creation of new financial tools and the provision of incentives for investments in electrical technologies.
For Cyprus, these European developments are of particular importance. The high dependence on imported fuels, the increased cost of electricity, the high penetration of photovoltaics, but also the challenges that still exist in terms of the development of electrical networks and storage, make electrification an important opportunity to strengthen the country's energy security and competitiveness. Success, however, will depend on the speed of implementation of the necessary infrastructure and the creation of a stable investment framework that will encourage investment.
In this context, the Federation of Employers and Industrialists (OEB) closely monitors European initiatives and actively contributes to the dialogue for the formulation of policies that enhance the competitiveness of businesses. OEB believes that electrification can be a key tool for achieving European goals, provided that it is accompanied by competitive electricity prices, modern energy infrastructure and a stable regulatory framework that will allow businesses to safely invest in new technologies, contributing to the reduction of energy costs and the strengthening of the competitiveness of the Cypriot economy.
*Officer of the Department of Energy & Environment of OEB
