One of the biggest barriers to electrification isn’t the technology – it’s the price signal.
Across much of Europe, electricity is still significantly more expensive than fossil gas. In fact, only in Finland and Sweden is electricity less than twice the price of gas.
Yet the European Commission’s Electrification Action Plan, drawing data from EHPA, shows that Member States with the lowest electricity-to-gas price ratios record three times more heat pump sales than those where the ratio exceeds three.
The Commission has therefore set a clear objective: bring national electricity-to-gas price ratios down to a maximum of 2.5 for households and 2.0 for industry by 2030.
Why does this matter?
Around half of a household electricity bill reflects the cost of electricity itself, but the rest is made up of taxes, levies and network charges. In many Member States, electricity is taxed more heavily than fossil gas, while fossil fuel subsidies continue to artificially lower the price of gas. This weakens the business case for heat pumps and other electrification technologies.
The Electrification Action Plan tackles this imbalance from several angles. Alongside the Plan, the Commission is proposing legislation to future-proof electricity bills, including reforms to electricity taxation and network charges that better support electrification. It also commits to progressively phasing out fossil fuel subsidies as part of the post-2030 Energy Union package.
For EHPA, this is a major step forward. Improving the electricity-to-gas price ratio has long been one of the Association’s key policy recommendations because it creates a level playing field between clean electricity and fossil fuels.
The Commission has recognised the problem and proposed the right direction of travel. The next challenge is implementation.
Member States now have the opportunity to rebalance energy taxation, remove distortions that favour fossil fuels and ensure electricity becomes the obvious choice for heating homes and powering industry.
