Europe’s energy crisis is widening the cost gap with global competitors and slowing efforts to electrify homes,transport and heavy industry.
Morningstar’s latest Electrification Observer highlights that high electricity prices are hitting chemicals,steel and other traditional sectors while households and businesses struggle to adopt low carbon technologies.
Tancrede Fulop,senior equity analyst at Morningstar,said:“Europe finds itself in a difficult bind,as its economy shoulders much of the burden of decarbonisation.Electricity prices remain prohibitively high,making technologies such as heat pumps unaffordable and undermining the continent’s competitiveness against China and the US.”
He noted that only 23%of Europe’s energy consumption is electrified today and is forecast to reach just 25%by 2030,well below the 32%required for EU climate targets.
This shortfall could increase political pressure to delay major policies such as the 2026 phaseout of free industrial carbon allowances and the 2027 launch of carbon pricing for residential heating.
Electrification levels also vary widely across the bloc.
Morningstar forecasts sluggish electricity demand growth of 1.1%a year to 2030 in the EU,below the 1.4%expected in the US.
Consumption will barely exceed 2019 levels,undermining ambitions to boost the economy through electrification.
Data centres will drive rapid demand growth of 15%annually to 2030
Northern Europe,France and Iberia are set to attract more data centres and industrial decarbonisation projects,although much of this appears priced into markets after strong gains by Spanish utilities.
Morningstar’s 2030 electricity consumption forecast is 8%below consensus due to green hydrogen project cancellations and Europe’s deindustrialisation.EU chemical production is set to fall 10%by 2030.
Morningstar expects only 0.6 megatons of green hydrogen output by 2030,far below the EU’s 10 Mt target.Even so,it sees Air Liquide as attractive.
Europe’s electrification rate will rise only to 25%by 2030,delivering a 43%emissions reduction from 1990 levels,short of the EU’s 55%goal.
Transport electrification will remain limited.
EVs are expected to reach 45%of car sales by 2030 but transport energy use will be just 5%electrified,cutting total CO₂emissions by only 5%.
