Europe's clean power gains undermined by slow electrification of transport and heating

Europe has achieved what Adrian Hiel calls "staggering progress" in cleaning up its electricity generation. Solar panels and wind turbines are being installed at a pace that nearly matches the bloc's own climate targets. Yet the continent remains dangerously exposed to fossil fuel price shocks because the second half of the transition, replacing the petrol cars and gas boilers that consume that electricity, has barely begun.

The electricity paradox

Hiel, who directs the Electrification Alliance, a coalition that includes SolarPower Europe, the International Copper Association Europe and the climate thinktank Transport & Environment, frames the problem in two acts. Act one, cleaning up the power supply, is largely complete. Act two, getting that clean electricity into the machines people use every day, vehicles, heating systems, industrial processes, is a "completely different challenge that we haven't really faced off with yet."

The consequence of that gap is visible in household bills. The war between the United States and Israel against Iran, which began in late February 2026, has shut the Strait of Hormuz, the chokepoint through which 20% of the world's oil and seaborne gas passes. Retaliatory strikes have since hit major refineries across the Middle East, including in Qatar, a critical supplier of liquefied natural gas to Europe. Analysts now expect high fuel prices to persist for years even if the conflict ends quickly.

"Gas is going to get rather expensive as we outbid Asia for it, and it is likely to stay expensive for the next several years," Hiel said. That pressure will force governments to spend heavily on bill support, which in turn could squeeze the budgets available for helping households switch to heat pumps and electric vehicles.

Tax distortion keeps fossil fuels competitive

One of the most persistent barriers is the tax treatment of energy. In most European countries, electricity carries significantly higher taxes and levies per unit of energy than gas or heating oil, a legacy of an era when power generation was dominated by coal. Hiel argues the logic has inverted. "Thirty years ago, our electricity was coal-fired and dirty and bad for your health, it made sense to treat it like alcohol and tobacco. But now it's the healthy option. We need to tax it like a fresh apple."

The Electrification Alliance has long campaigned for a reversal of this hierarchy. The International Energy Agency reinforced the point on Friday, noting that a faster shift to electric cars and heat pumps would complement its emergency fuel-saving action plan designed to quell the current price shock. The economics of the switch have also improved dramatically since the last energy crisis. Hiel noted that the fall in clean technology costs means electrification no longer requires the financial sacrifice it would have demanded a decade ago.

Von der Leyen's pledge to rebalance energy taxation

European Commission President Ursula von der Leyen acknowledged the problem on Thursday. She said she would ensure "electricity is taxed less than fossil fuels" by mandating lower rates. The commitment marks a shift in tone from the executive, which has previously left energy taxation largely to member states under unanimity voting rules that have blocked reform for years.

Whether the Commission can deliver on that promise remains uncertain. Energy taxation directives require unanimous agreement in the Council, and several member states rely heavily on electricity levies to fund renewable support schemes or general budgets. Any mandatory rebalancing would need to address those fiscal dependencies or face a veto.

Personal experience shows economics have shifted

Hiel's own household illustrates the changed calculus. After the Paris Agreement was signed in 2015, he set himself a ten-year deadline to eliminate the direct combustion of fossil fuels from his life. In recent weeks he insulated his home, installed a heat pump and added solar panels. The combination of energy savings, a reduction in his mortgage rate linked to the energy upgrade, and an upfront grant means he is now "basically completely insulated" from the energy crisis.

"In 2015, it was going to be a real sacrifice, the costs were enormous and it was never going to pay back, whereas now it's completely different," he said. "It's not going to cost me a cent overall." That experience mirrors broader market data: heat pump sales in Europe rose by nearly 40% in 2022 and 2023 before dipping slightly in 2024 as gas prices eased, while electric vehicle registrations continued to climb despite the withdrawal of some purchase subsidies.

Iran war tightens the screw on gas markets

The current crisis has a specific geopolitical trigger. The US-Israel campaign against Iran has disrupted not only crude oil flows but also the liquefied natural gas supply chain on which Europe has depended since cutting pipeline imports from Russia. Qatar, the world's largest LNG exporter and a key European supplier, has seen its export infrastructure targeted. The Strait of Hormuz closure alone removes roughly one fifth of globally traded oil and seaborne gas from the market.

European buyers are now competing aggressively with Asian importers for available cargoes, driving up spot prices and locking in higher forward curves. Storage levels across the EU entered the winter above 90% but withdrawals have accelerated since February. If the conflict persists into the next injection season, the continent could face a supply crunch similar to 2022, but with less fiscal headroom to cushion the blow.

The fiscal trap: bill support versus electrification funding

Governments face a binding constraint. Every euro spent on universal bill subsidies or price caps is a euro not available for grants, low-interest loans or tax breaks that accelerate the replacement of gas boilers and petrol cars. The Electrification Alliance warns that short-term relief measures risk entrenching the very dependency that makes Europe vulnerable. Hiel argues that the response to the 2022 crisis was "panicky" but did at least spur a renewable expansion that has left the power sector better prepared this time round. The danger now is that the political focus remains on suppressing symptoms rather than curing the underlying condition.