EUROPEAN COMMISSION

Brussels, 26.2.2025

COM(2025) 79 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Action Plan for Affordable Energy





Unlocking the true value of our Energy Union to secure affordable, efficient and clean energy for all Europeans

Our energy market fuels our economy, supports our society and connects our communities. Together, we have built resilient grids, decoupled our economic growth from our greenhouse gas emissions, reduced our dependencies and shown leadership in the global energy transition. The EU managed the recent energy crisis thanks to the rapid deployment of clean energy, the diversification of supply, the availability of energy interconnections critical to its security and the solidarity demonstrated across Member States. 

However, there is a clear and urgent need to strengthen our Energy Union. High energy costs are hurting our citizens: energy poverty affects more than 46 million Europeans, with a disproportionate impact on vulnerable groups. 1 For industries, retail electricity prices have almost doubled: for a medium-sized industrial consumer, prices in 2023 remained 97% above their 2014-2020 average. 2  The gap in energy prices between the EU and our main competitors is growing, 3 with the risk that new investments favour countries outside Europe and that existing industries relocate, leading to a potential drain of critical industries that drive the EU’s economy and resilience and create quality jobs. 4 The current situation undermines the EU’s global standing and international competitiveness. 5

Figure 1. Ratios of industrial retail electricity prices in global markets (European Commission estimations)
(A ratio of more than 1 means that EU prices are higher than those of the corresponding non-EU country)

Therefore, the Commission is launching an ambitious programme to support our citizens, businesses and industry by driving growth and investment and promoting decarbonisation efforts.

The Competitiveness Compass for the EU 6  will guide the work in the coming five years to reignite economic dynamism in Europe. The Clean Industrial Deal, our growth and prosperity strategy bringing together climate and competitiveness, is a central component of this work. Supporting the Clean Industrial Deal, the Action Plan for Affordable Energy will focus on decreasing energy costs for citizens, businesses, industry and communities across the EU, considering the needs of all people, including vulnerable groups.

This action plan presents measures to lower energy bills in the short term, while accelerating the implementation of much-needed cost-saving structural reforms and strengthening our energy systems to mitigate future price shocks. With the full engagement of Member States and all relevant stakeholders, these eight actions for affordable energy will reduce energy costs and help build a genuine Energy Union that delivers competitiveness, security, decarbonisation and a just transition, passing on to end users the benefits of cheaper energy.

Energy bills are determined by a combination of factors: energy supply costs linked to the overall level of consumption, network costs, and excise levies and taxation. In turn, energy supply costs depend on wholesale prices, driven by diverse factors like supply and demand conditions, energy mix, interconnections, competition, weather and geopolitical realities as well as retail competition among suppliers. These factors explain the structural challenges of the EU energy system.

First, Europe’s reliance on imported fossil fuels causes energy price volatility and higher supply costs, while making the EU more vulnerable to external pressure and global market uncertainty. While demand for natural gas declined by 18% between August 2022 and May 2024, 7 the EU remains exposed to global fossil-fuel price fluctuations, with 90% of its natural gas demand covered by imports. 8  The consequences of excessive supply dependence were evident during the recent energy crisis. Russia’s weaponisation of its gas exports led to supply uncertainties and sharp price spikes. In 2022, the EU’s fossil-fuel energy import bill reached EUR 604 billion, after a historic low of EUR 163 billion in 2020. 9 With a substantial share (28.9%) of the EU’s average electricity generation mix still based on fossil fuels, 10 and transport largely fuelled by oil products, fossil-fuel import costs have a significant impact on consumers’ energy bills (see Figure 2).

Figure 2. EU electricity bills for households (DD band, left) and industry (ID band, right) in real 2023 prices 11

Second, inefficiencies and lack of full integration in the electricity system also impact energy bills. Europe has the most integrated grid globally, but more needs to be achieved as regards interconnections, grid infrastructure, energy system integration and system flexibility to boost the integration of cheaper and cleaner energy sources. Lengthy permitting procedures for clean energy and grid projects further hinder progress. Current estimates are that by 2030, around half of the EU’s cross-border electricity new capacity needs will not be addressed, 12 holding back the complete integration of our energy market.

Finally, increasing system costs covered by network charges and taxes and levies further drive up electricity prices and constitute a substantial part of the bill, which may further increase as our networks will need considerable investments in the coming years.

EU energy policy at a crossroads

Energy is a building block and a driving force of our Union. However, although we have built a strongly interconnected energy market, we do not yet have a genuine Energy Union. We are at a critical turning point for the European Union. The challenges facing us are clear and urgent. Our energy costs remain comparatively high, putting Europe at a real risk of deindustrialisation and posing a critical threat on our economy.

The cost of inaction is higher than the cost of action. Stalling halfway on the path to decarbonisation places a burden on our economies and our industrial capacity. For example, in 2023, the curtailment of renewable energy in Germany alone cost over EUR 3 billion, with the benefits of the production of this cheap energy being lost for consumers and businesses. Furthermore, as the electricity system grows in complexity, so do the costs: costs for managing grid congestion, mainly from re-dispatching, reached a peak of EUR 5.2 billion in 2022 13 and could rise to EUR 26 billion by 2030. 14 The most effective way to manage these costs is through shared and strategic European investment while ensuring technological neutrality.

The cost of failing to complete the transition is compounded by the cost of not taking full advantage of our single market and its potential to reduce prices. For example, Southeast Europe experienced price spikes during evening hours last summer averaging at over EUR 250/MWh, among others driven by lack of cross-border capacity and insufficient flexibility that could have been eased by a more interconnected energy system.

Powering the Clean Industrial Deal through a robust Energy Union

If the challenges are clear, so is the role of our Energy Union to address them. The energy crisis revealed where we need to continue strengthening our infrastructure and deepening EU energy market integration.

We have already taken major steps. With the REPowerEU Plan, we have made our energy system more resilient by boosting energy efficiency, rolling out clean generation and diversifying our supplies. Progress has been evident. Newly installed wind and solar capacities reached record levels of 78 GW in 2024 and heat pump sales hit 3 million units both in 2022 and 2023. In 2024, renewables generated a new all-time high of 48% of electricity in the EU, increasing from 45% in 2023 and 41% in 2022. Our efforts have paid off: since the spring of 2023, gas prices have come down considerably. In the coming weeks, the Commission will also give an additional push towards the full implementation of REPowerEU to completely end Russian energy imports. Still, to deliver lasting long-term solutions, we must not roll back but continue moving forward. We need to finally achieve a genuine Energy Union through three main enablers.

First, we need a fully integrated energy market, supported by an interconnected and digitalised network and a cohesive regulatory and governance regime. The Internal Energy Market and the integration of European electricity markets already benefit consumers by around EUR 34 billion every year. 15  Further integration could increase these benefits to up to EUR  40-43  billion per year by 2030. 16 We will need massive grid upgrades, and this should be done in the most cost-efficient way: wider use of grid enhancing technologies, and flexible use of the system could save up to 35% in conventional grid expansion costs. Regional cooperation across Europe, underpinned by better interconnectivity and closer coordination, 17 can reduce the need for flexibility investments by up to 20%. 18

Second, we need a decarbonised energy system, driven by a substantial scale-up of clean energy and electrification, with energy efficiency at its centre. The world is moving faster than ever towards clean energy. Global spending on clean energy hit a record of EUR 1.9 trillion last year. For every euro invested in fossil fuels, two euros are invested in renewable energy. We will deliver decarbonisation, because decarbonisation delivers not only clean energy, but also quality jobs, growth and energy security. In addition, reducing the share of fossil fuels in the European energy system would further shield consumers from market volatility.

Third, with natural gas still remaining a part of Europe’s energy consumption, we need a more transparent and competitive well-functioning gas market, while continuing diversification and demand reduction efforts. The EU remains exposed to volatile movements of international gas prices. We need to make sure that gas is traded on fair terms, and we need to leverage our collective strength. As an example, the demand aggregation mechanism has matched 42 billion cubic metres since 2023, which is 13% of the EU gas consumption during that period.

In short, only by accelerating investments in clean energy and infrastructure, ensuring rapid acceleration of electrification, increasing energy efficiency and bringing transparency and fairness to gas markets can we make energy affordable. That is why Europe needs this Action Plan: to deliver a fast and firm response that lowers energy costs in the immediate term, to future-proof the energy system, to attract investments and to ensure delivery. In this respect, streamlining our regulatory framework and reducing administrative burdens can help businesses by providing visibility and simplicity for the deployment of clean technologies. Concerted action and engagement of European leaders at the highest political level is essential to deliver on this transformative Action Plan.

Without the energy transition, the EU’s fossil fuel import bill in 2025 would be EUR 45 billion higher than in 2019, representing an estimated 0.25% of the EU’s GDP.

The implementation of this Action Plan will enable the EU to fast track the benefits of the clean transition. This will translate into a drop in the EU’s fossil fuel import bill year after year towards EUR 130 billion of savings per year by 2030, representing an estimated 0.65% of the GDP by 2030. 19 Such savings from reducing fossil fuel use can be roughly broken down along three lines: (i) increasing electrification and energy efficiency, which in turn decreases total fossil fuel demand (25%), and (ii) replacing persistent fossil-fuel demand in electricity generation with clean energy (50%), supported by (iii) sufficient grid capacity, smart grid infrastructure and energy system flexibility (25%). The savings in the EU’s fossil fuel import bill will increase annually up to EUR 260 billion by 2040. 20

This Action Plan suggests immediate concerted action by the European Commission, the European Parliament, Member States and industry to: (i) lower energy costs for all; (ii) complete the Energy Union; (iii) attract investments; and (iv) be ready for potential energy crises. Most actions will be delivered in the course of 2025, focusing on the actions that bring immediate relief for energy consumers.

Figure 3. The four pillars of the Action Plan for Affordable Energy

Pillar I: Lowering energy costs

Lowering the bill requires addressing its three cost components: network and system costs, taxation, and supply costs. Moreover, with natural gas being a significant part of the electricity mix, ensuring well-functioning gas markets that deliver market-based prices will also help lower both the gas and the electricity bills. Further, energy efficiency and savings will reduce the amount of electricity that consumers need to buy.

Action 1: Making electricity bills more affordable

Member States can lower electricity bills already today. This requires immediate action as well as greater ambition, particularly in the areas of network charges and taxation.

a)Network charges

Network charges finance the physical upgrade of grids and the operation of the system. Significant capital is required for investments in modernising and expanding the electricity network. This is essential to facilitate the deployment of renewables, electrification and new industrial and business demand. At the same time, the costs of operating the power system are growing. 21 Network charges that incentivise system efficiencies and use of lower cost clean electricity could rapidly reduce the costs of operating the overall system, for example by decreasing re-dispatching needs and costs, lower peak demand and thereby grid investment needs and, ultimately, reduce the network charges component of the energy bill compared to no action taken.

In addition, given the magnitude of investments needed, spreading these investments over time can help ensure that costs remain contained for consumers. This is particularly relevant when investments anticipate uncertain future electricity demand growth due to electrification, where charging all such investments on current users may unfairly burden early adopters, slowing down electrification. 22  

b)Taxes and levies

High taxes on electricity increase bills and the current structure of taxation does not disincentivise the use of fossil fuels over the use of electricity, therefore slowing down electrification and demand for cheap homegrown electricity. Two main taxes are levied on electricity: VAT and energy taxation – complemented by other national taxes. The Energy Taxation Directive 23 provides for a minimum taxation (excise duties) of electricity and enables Member States to lower the tax rate down to zero where legally possible for energy-intensive industries and households and for all industries in case of electricity from renewable sources.

Lowering taxation has proven very effective in containing energy bills during the energy crisis, when Member States implemented reductions in VAT and energy taxes, and income transfers to vulnerable groups. 24 In France, for example, the electricity consumption tax was reduced from EUR 22.5/MWh to EUR 0.6/MWh. 25 Such support should be particularly targeted to effectively achieve the objective while minimising fiscal costs. 26  

c) Lower supply costs by increasing retail competition

Currently, 73% of EU households as well as a significant proportion of small to medium-sized enterprises are on fixed electricity contracts 31 . Many could lower their electricity bills by switching to a more competitive supplier or shifting consumption to times of lower prices but are still facing market barriers. Vulnerable consumers require specific attention. Affordability measures should consider the specific needs of lower-income households, including flexible billing options that prevent disconnections for economically disadvantaged groups. Energy communities must also be strengthened to allow local communities, citizens and companies to join forces and invest in clean energy projects at local level; thereby allowing them to produce, sell and consume their renewable energy. It is essential that the EU continues to provide sufficient dedicated funding to support the completion of the Energy Union.

Action 2: Bring down the cost of electricity supply

Swift and full implementation of existing EU electricity legislation is crucial to reduce the cost of electricity supply: recently adopted rules on permitting, contracts, flexibility, consumer empowerment and market surveillance can deliver lower costs. This should be complemented with the following immediate actions.

a)Long-term electricity supply contracts

High and volatile gas prices drive up electricity prices. Power purchase agreements (PPAs) and long-term contracts between clean energy developers and industrial consumers and companies allow the latter to benefit from stable and cheap electricity prices for a long duration. PPAs can play a role in de-risking projects by enabling renewable energy developers to secure a long-term price for their output, which supports investment decisions. They can also provide long-term price stability for industrial consumers. While demand for PPAs is increasing, 35 these contracts need to be further encouraged and mainstreamed, including to energy-intensive businesses that do not have wide access to them and may still face barriers. The Commission will step up efforts under the electricity market rules to decouple electricity bills from price volatility by boosting the uptake of long-term electricity supply contracts.

b)Reduce permitting times for new clean power supply and energy infrastructure

Renewable power generation has become the default source of least-cost new power generation. 38 , 39  However, the lead times for new projects can be up to 7-10 years for wind projects, up to 8-10 years for distribution grid projects 40 and at times even up to 17 years for transmission grid projects. 41 This is severely hampering the massive roll-out of renewable energy and can impact the economic model of projects.

At all levels – the EU, national, regional and local – authorities must make a major effort to accelerate the permitting procedures for grid, storage and clean energy projects, as outlined in the Draghi report. This includes permitting for infrastructure that can provide flexibility to the electricity system, for example electric vehicle recharging points. The Commission calls on Member States to rapidly implement the recently adopted legislative framework for permitting of clean energy projects. 42 The impact of recent permitting reforms is already visible in Member States that have made extensive use of the emergency regulation. For example, as a consequence of the application of swifter permitting during the energy crisis in Germany, permits for new onshore wind projects have more than tripled since 2022, ramping up the number of installations by 48% in one year (2023) 43 and about 3,300 km of transmission grids have been approved since Q2 2023, saving 12 months to three years in permitting time.

In addition, a large part of the time taken by the permitting processes for clean energy investments, storage and grids is dedicated to environmental assessments. Targeted updates to the legislative framework on environmental assessments are necessary to significantly simplify and shorten the permitting procedures for such projects, while maintaining environmental safeguards and protecting human health. Shorter deadlines for permitting energy infrastructure at national level are also key to lower energy costs. This can be eased by measures such as tacit approvals for certain administrative decisions in the permitting process, where this principle exists in the national legal system, and one-stop shops for developers.

The Draghi report also concludes that greater focus is needed on digitalising national permitting processes across the EU and addressing permitting authorities’ lack of resources. The permitting process, and the environmental and geological data needed for the clean energy investments, will need to be digitalised. Moreover, more granular data on the resource potential for wind and solar across the EU will help Member States in mapping the areas needed to achieve their national targets, as well as in designating of renewable acceleration areas, as envisaged under the Renewable Energy Directive. Streamlined permitting will cover hybrid energy projects with several technologies, such as a renewable generation and storage, using the same grid connection. Finally, the Commission will assess the possibility of streamlining current permitting and licensing practices for the deployment of new nuclear energy technologies such as Small Modular Reactors (SMRs).

c)Grids and interconnectors as enablers of the energy transition and industrial decarbonisation

An efficient network ensures that energy flows from where it is produced to where it is needed. It mitigates price-peak episodes and ensures that everyone benefits from energy at the best cost. It is thus important to interconnect areas with vast available clean energy potential with European regions with high energy demand, so that affordable energy can be delivered to where it is needed most.

EUR 584 billion is necessary for investments in the electricity grids this decade. 48 , 49  Cross-border infrastructure needs are often not matched by concrete projects, leading to undue price disparities between some regions, such as recently observed in southeast Europe. The Agency for the Cooperation of Energy Regulators (ACER) finds that 32 GW of cross-border capacity needed by 2030 remains unaddressed 50 Major infrastructure projects of regional or EU-wide significance face challenges in relation to increasing project costs 51 and an equitable sharing of costs and benefits. 52 Four examples of such missing flagship links include:

·Creation of an integrated offshore network in the Northern Seas;

·Further reinforcing physical integration of the Baltic States with Central and Northern Europe following the Baltic synchronisation and ensuring security of cross-border infrastructure in the Baltic Sea region;

·Increasing the interconnection level of the Iberian Peninsula with the rest of Europe;

·Increasing interconnectivity and market integration between Southeast and Central Europe.

The benefits of these flagship projects will expand beyond the Member States hosting projects. Therefore, only through the design of new projects and the acceleration and completion of existing ones, can the Energy Union materialise. Given the scale and impact of these projects, it is essential that the EU continues to provide sufficient funding to support the completion of the Energy Union’s interconnectors at both cross-border and national levels. Investing to achieve the EU’s decarbonisation goals and removing barriers to our Energy Union offers the opportunity for Europe to lower energy prices, increase its energy security and take the lead in clean rtechnologies. 53 Furthemore, the Communication on the road to the next Multiannual Financial Framework 54 acknowledged that we need to ensure that the EU budget supports European public goods, notably cross-border projects.

At the same time, existing infrastructure needs to be used efficiently. For example, at least 70% of the capacity of interconnectors should be made available for cross-border electricity trading, but most Member States are still far off this target. 55

At national level, grid connection requests to distribution networks are growing exponentially across Europe and create long queues, slowing down renewables, electrification and the establishment of industrial clusters, and hampering investments. Beyond electricity, new hydrogen, carbon and local heat networks are necessary.

d)Boosting flexibility

More flexibility in the system, for example with storage and demand response, helps manage demand and supply imbalances by encouraging customers to shift electricity consumption to times when electricity is more plentiful or demand is lower, and therefore when electricity is cheaper. This reduces price spikes and negative price episodes, reducing volatility and contributing overall to lower and more stable electricity prices. Electrified demand such as new electromobility fleets can play a role in providing flexibility services.

In many Member States, demand response and storage face barriers 60 to accessing wholesale markets, or to participating in ancillary and congestion management services. In 10 Member States, aggregators do not have a properly defined legal framework, which prevents them from participating in those services that can help provide benefits to consumers. In 10 Member States, fewer than 30% households have access to smart metering systems (providing real-time information about energy consumption). Roll-out needs to be accelerated. 61  Some industrial consumers can significantly contribute to grid flexibility by shifting their energy use to times of low demand, reducing costs and improving system stability.

Demand flexibility should also be promoted on the retail market as a deal offering lower prices for voluntary industries and consumers willing to participate in energy system integration.

Action 3: Ensuring well-functioning gas markets

The price of imported natural gas has a direct impact on electricity prices and increases market volatility. EU gas wholesale prices have not fully reverted to pre-crisis levels and are on average nearly five times those in the US, as compared to double to triple before the crisis. 68 This price differential affects the competitiveness of the European industry.

The importance of gas markets for our economy makes it essential to ensure an optimal functioning of those markets. Full regulatory oversight and close cooperation between energy and financial regulators is required to prevent market manipulation and to close any possible loopholes related to any lack of transparency, asymmetry of information and risk of market concentration. Earlier this month, therefore, the Commission set up a Gas Market Task Force to comprehensively scrutinise the EU natural gas markets and, where necessary, take action to ensure their optimal functioning and prevent commercial practices distorting market-based pricing, learning from the lessons of the energy crisis.

To be able to address unlawful behaviour in gas markets in a swift manner, energy and financial regulators should be effectively equipped to monitor market developments, detect and pursue any potential cases of market abuse (i.e. market manipulation and insider trading). Cooperation on enforcement and data sharing between national energy and financial regulators and between ACER and ESMA needs to be enhanced and taken to the next level. Member States have to ensure that regulatory authorities have all the necessary powers to pursue and sanction market abuse, and to equip them with the resources to prioritise investigations in this field. Moreover, ACER should use to the full extent its new cross-border investigatory powers to support national energy regulators.

Alternatives to natural gas imports should be explored when possible, notably via electrification or boosting the production of biogas and biomethane in line with REPowerEU. Demand aggregation and joint purchasing can play a strong role in accelerating market creation for energy sources and materials needed for clean energy production. By aggregating their demand and adopting joint purchasing strategies in accordance with EU competition rules, EU buyers can leverage their collective economic weight, strengthen their negotiation position and negotiate better terms with suppliers. This approach was also adopted by Japan, which has a longstanding policy of supporting investments in export infrastructure in countries producing liquefied natural gas (LNG). EU joint purchasing power should be harnessed by exploring the option of longer-term contractual engagements to make prices more stable, for example by securing gas liquefaction rights or purchase options. With the EU’s competitiveness, geopolitical considerations and climate goals in mind, the EU and/or Member States could also accompany EU importers in investing directly in export infrastructure abroad, providing preferential loans to private investors.

In addition, better coordination among Member States and more flexible filling trajectories, with the support of the Commission, can help reduce system stress and avoid market distortions linked to gas storage refilling, supporting refilling at better purchasing conditions and security of supply.

Action 4: Energy efficiency – delivering energy savings

Energy efficiency is a key contributor for affordable energy in industry and households, and for industrial competitiveness. It limits the impact of high, volatile energy prices on consumer bills. EU industry has reduced its energy consumption by approximately 20% since 2000, all while increasing industrial output. To address the challenges the EU faces, energy efficiency solutions must be leveraged. Fostering a single market for energy efficiency services will help Europeans to benefit from services that can help them reduce their energy bills at the best cost, in particular those that have a high upfront cost. 72 An enhanced market for energy efficiency providers can help more companies to get advice on efficient solutions, for example, for re-using their process heat.

Secondly, energy efficient products lower energy bills immediately. However, the many non-compliant products imported from non-EU countries damage the competitiveness of EU suppliers and reduce the benefits for citizens and businesses.

Pillar II: Completing the Energy Union

Despite our success in building an interconnected energy market, a true Energy Union remains a work in progress. As the EU faces rising energy costs that place a burden on households and impede industrial competitiveness –particularly impacting energy-intensive sectors– the need for a transformative approach is evident. This is why we need to continue working on longer-term, structural measures that will bring about the cleaner and cheaper energy that we need, and that will further bring us in a genuine Energy Union, including increasing investments in research and innovation for clean energy solutions. The EU must advance towards electrification and a fully integrated single market for energy, achieving interconnection goals and leveraging complementarities among Member States to create a genuine Energy Union that benefits all.

This Action Plan is the first stepping stone towards more interconnection and more integration. This is why in the coming months, the Commission will launch a series of initiatives aiming at strengthening the governance of the Energy Union, roll out clean energy, improve our security of supply, and reduce the bills of citizens and businesses.

Action 5: Completing the Energy Union

Building upon the success of the REPowerEU Plan, which boosted clean power generation and diversified energy supplies, a new Electrification Action Plan (Q1 2026) and a Heating and Cooling Strategy (Q1 2026) will further support these objectives. Ambitious electrification of the energy system and expanding clean generation sources will increase energy efficiency of the energy sector as a whole, help decarbonise industrial, mobility and heating and cooling sectors and support the uptake of clean and domestic energy production. By 2030, these initiatives will reduce our reliance on fossil fuels, potentially saving billions annually. Tax credits for industrial electrification can promote electrification and help EU industry become more competitive by supporting the affordability of such equipment, increasing sales and encouraging consumer adoption.

Digitalisation is another source of savings for consumers, but also a potential vulnerability. The Commission will adopt a Strategic Roadmap for Digitalisation and Artificial Intelligence (AI) for the Energy Sector in 2026 to accelerate the rollout of European AI solutions in areas such as electricity grid optimisation, energy efficiency in buildings and industry, and demand-side flexibility. Additionally, it will foster AI-driven research and innovation by connecting start-ups with energy companies while ensuring robust safeguards for cybersecurity, data privacy and safety, The Commission will also examine the increasing energy consumption of data centres 78 , 79 and promote their sustainable integration into the energy system. Data centres could increase strain on the energy system and drive upenergy prices , especially considering data centres’ capacity to outbid other energy consumers for access to energy.

At the same time, the EU’s Strategic Energy Technology Plan (SET Plan) helps addressing the current fragmentation in the EU’s Research & Innovation portfolios for clean energy and electrification. Efforts still need to be intensified to reach the EU public and private expenditure target of 3% of GDP. 80 , 81 The Commission will foster innovation, notably through coordination with Member States via the SET Plan Steering Group established by the Net-Zero Industry Act. 82 In addition, to support fusion as an innovative, decarbonised energy source for the future, a Fusion Strategy will be proposed, including the creation of a Public-Private Partnership (PPP) to accelerate commercialisation.

To meet its energy and climate targets, the EU needs over EUR 570 billion annually between 2021 and 2030 and EUR 690 billion annually from 2031to 2040 for investments in renewable energy, including solar, wind and biomass, energy efficiency and grid capacity. The Commission will also assess investment needs in nuclear energy 83 and foster investment in next-generation clean energy technologies, like nuclear fusion, enhanced geothermal and solid-state batteries, as well as into existing capacities such as for refurbishment. While the bulk of investments needs to come from private capital – public funding needs to be better targeted to leverage private investments by de-risking strategic projects notably through guarantee and equity instruments. The Commission will tackle the investment gap and mobilise private capital for the energy transition with a Clean Energy Investment Strategy and will present an updated Nuclear Illustrative Programme (PINC).

Above all, the completion of a genuine Energy Union requires a fully integrated energy market, with a cohesive governance framework that aligns national and EU-level objectives and ensures that decisions of cross-border and EU relevance are taken at the right level. To this end, the Commission will issue a White Paper on deeper electricity market integration by early 2026.

In addition, the National Energy and Climate Plans (NECP) must evolve into strategic investment plans that foster investment predictability, consumer confidence, innovation and market growth for clean technologies. The Commission will propose a revision of the Governance Regulation to simplify, strengthen and modernise the Governance of the Energy Union and Climate Action 84  to prepare Europe for the post-2030 energy and climate policy framework. In addition, regional initiatives like the Trans-Mediterranean Energy and Clean Tech Cooperation Initiative could play a role in supporting clean tech manufacturing.

Energy prices can differ considerably between Member States. To enhance coordination across the Energy Union and strengthen governance of the electricity system, the Commission will set up an Energy Union Task Force. The Task Force, which will consist of high-level representatives from the Commission, relevant EU bodies, Member States and stakeholders as needed, will examine and identify technical or regulatory adjustments, and will regularly report to the President of the Commission, the European Council, the Energy Council and the European Parliament.

To support this work, the Commission will enhance its focus on assessing the implications of relevant initiatives on the affordability of energy for households and businesses. The outcome of the relevant analyses –involving whenever possible external experts– will be appropriately reflected in impact assessments on new legislative initiatives and reviews of existing legislation. It will complement the information the Commission regularly publishes on the impact of its initiatives through various reports as the State of the Energy Union Report 85 and the reports on energy prices and costs. 86

Pillar III: Attracting investment and ensuring delivery

A genuine Energy Union based on homegrown clean and affordable energy for all European consumers requires substantial investment over the next decade and a robust governance. A strong political leadership and commitment and an inclusive engagement of all the actors of the energy value chain are necessary to swiftly deliver together on this Action Plan.

Action 6: Establishing a tripartite contract for affordable energy for Europe’s industry

Growing market uncertainty can create significant challenges for project developers and can delay or deter investments. To counteract this, governments, energy producers, and energy-consuming industries can create together a favourable investment climate for an affordable and sustainable energy system and a competitive industrial sector, while ensuring the retention and creation of quality jobs, as emphasised in the Antwerp Declaration.

vClean-energy producers need scale and certainty of demand to ensure long-term planning, which helps reduce risks for investors and project costs. This certainty would benefit also manufacturers in the supply chain, for example producers of substations or cables for grid projects, allowing them to invest into new manufacturing capacities in Europe and offer lower prices. That would enable, for example, large-scale solar or offshore wind project developers to secure supply chains and buy at lower costs.

vEnergy-consuming industry, and in particular energy-intensive industry, needs certainty on energy supply and prices to plan their production and take investment decisions that will determine their transformation. For example, the steel industry needs long-term certainty on electricity supply and prices to invest in electrification of production processes. In return, the energy-intensive industry can provide offtake certainty to energy producers by engaging in long-term contracts.

vThe EU and Member States’ governments can lower risks through stable regulatory frameworks and measures to facilitate investments. Bringing this predictability for project developers and supply chains contributes to derisking investments and lowering costs for businesses and households. This could be done, for example, by committing to a longer-term, reliable and granular timeline of auctions for clean energy projects and relying on supportive tender designs that reflect the Net-Zero Industry Act’s principles for resilience, security and sustainability.

In that regard, the experience of the Wind Charter 93 and the Solar Charter 94 have demonstrated the added value of bringing together institutional and economic actors to make decisive steps in building a competitive value chain in key sectors of the clean transition.

Building on these experiences, a broader Tripartite Contract for Affordable Energy can bring together these commitments and create an investment climate that supports cost-effective energy production, reliable energy supply, and long-term economic growth for all stakeholders.

Figure 4. A Tripartite Contract for affordable energy for Europe’s industry

Pillar IV: Being ready for potential energy crises

The recent energy crisis, the most severe Europe has seen yet, underscored the importance of EU-level coordination in managing price spikes in the internal market. To increase resilience in the face of any possible future energy crisis, Member States need tools for effective action and the security of supply framework needs to be strengthened, incorporating the lessons learned from recent developments.

Action 7: Ensuring security of supply for price stability

Stable energy supplies are critical for economic resilience, continued access to affordable energy and avoiding extreme price volatility. Disruptions to energy supplies caused by geopolitical tensions, cyberattacks, deliberate attacks or extreme weather events threaten affordability. A new regulatory framework is necessary to increase the resilience of the EU’s energy system and contain energy prices volatility.

Action 8: Price crises preparedness

The Electricity Directive and the Gas Directive contain provisions allowing the Council to declare a price crisis following a proposal by the Commission when certain excptional crisis conditions are met. In these situations, demand reduction in certain hours plays a central role in mitigating the effects of energy crises. Also outside of crisis periods, schemes to lower peak demand whereby consumers are paid by their supplier to reduce consumption in certain hours can be designed and activated already today. Experience in several Member States shows that during exceptional periods of system stress and high prices, consumers are willing to voluntarily reduce demand.

Second, for cases where network bottlenecks or congestion severely hinder energy flows, close cooperation with TSOs and national regulatory authorities is necessary to temporarily increase available cross-border interconnection capacities in certain situations (e.g. regional price crisis as seen in 2024 in Southeast Europe), ensuring that energy reaches areas most affected. Maintenance outages need to be properly coordinated within the internal energy market so that unnecessary impacts of such outages on neighbouring Member States are avoided.

Finally, as natural gas is overall expected to remain the main price-setter for electricity in the next years in the EU, the Commission stands ready to support Member States when designing State aid measures, to empower them to address extreme price spikes and exceptional price environments to decouple the translation of high gas prices into electricity prices, based on proven models in emergency situations.

The Action Plan for Affordable Energy sets out eight concrete short-term measures to deliver a genuine Energy Union for competitiveness, affordability, security and sustainability. Delivering in this transformative Action Plan will require the involvement of all actors: (i) the coordination of the EU with the instrumental support of the European Parliament and Council, to ensure an effective and pragmatic legislative framework; (ii) the firm cooperation of Member States to implement the actions on the ground and ensure the full potential of the plan is delivered for citizens; (iii) the active inclusion of stakeholders: our industry and businesses, our workers, our innovators and our citizens; and (iv) the involvement at the highest political level through an Energy Union Task Force.

The Commission will implement, monitor and report on the progress towards delivering the Action Plan in future State of the Energy Union reports. The Commission will regularly inform the European Parliament and the Energy Council of ministers of the progress and discuss impacts.

The challenges we face are significant. But so are our strengths. Together, we have built resilient grids and the most integrated energy network in the world. We have nurtured a strong manufacturing base, a highly skilled workforce, advanced technologies and a strong regulatory framework. We have held firm and stepped forward on our path to decarbonisation, decoupling our economic growth from our CO2 emissions and showing leadership in the global energy transition. These strengths make it possible to address the challenges that Europe currently faces.

The reasons why we take on these challenges are clear. Energy is at the foundation of our economy and of our society. It represents a small fraction of our GDP expenditure, 95 , 96 but it drives the entire economy. It moves the trains that transport us, it warms the houses we live in, and it activates the machines that make the goods we use every day. It is also one of the foundations of our EU, from a time when coal and steel were the pillars of the reconstruction of Europe – it has supported the growth of our economy and improved the daily lives of Europeans ever since.

The generation of energy and the integration of our energy markets has always been fundamental for European unity. From the European Coal and Steel Community to the development of the Energy Union, energy has been a key to our economic stability and a driver of EU integration. Guided by the Competitiveness Compass, and supporting the Clean Industrial Deal, this Action Plan for Affordable Energy will enable us to build on our strengths, allowing us to unlock the true value of our Energy Union and to reaffirm the EU’s commitment to an inclusive energy transition where no individual or community is left behind.

(1)

 Eurostat data base (Online data code: ilc_mdes01)

(2)

  Study on energy prices and costs – Evaluating impacts on households and industry – 2024 edition ; Trinomics, 2025

(3)

 See Figure 1. EU electricity retail prices for industry were in Q2 2024 2.2 times those in the US, twice those in China and 1.2 times higher than in Japan (historically lower).

(4)

 Employment in the renewable energy sector reached about 1.8 million in the EU in 2023. Renewable energy and jobs: Annual review 2024 ; IRENA in collaboration with ILO, 2024

(5)

  The future of European competitiveness, part B , Figure 2; Mario Draghi, September 2024. Widening divergence of retail prices across the EU, from less than EUR 100/MWh (PT, FI, SE) to over EUR 250/MWh (CY, HU, NL).

(6)

  A Competitiveness Compass for the EU  (COM(2025) 30 final)

(7)

  Impact Assessment Report for Europe’s 2040 climate target  (SWD(2024) 63 final, Annex 8 (part 3/5), section 1.2.3)

(8)

  Eurostat natural gas statistics . Europe imported 273 bcm in 2024, compared to 334 bcm in 2022.

(9)

 Report on energy prices and costs in Europe (COM(2024) 136 final); European Commission, March 2024

(10)

  European electricity review 2025 ; EMBER, January 2025

(11)

Eurostat,   nrg_pc_204_c and nrg_pc_205_c , 17 February 2025

(12)

  Electricity Infrastructure Monitoring Report 2024 ; ACER, December 2024

(13)

Network tariffs may significantly increase overtime by 60% by 2050 compared to 2022; Transmission capacities for cross-zonal trade of electricity and congestion management ; ACER, July 2024

(14)

  Redispatch and Congestion Management ; Joint Research Centre, May 2024

(15)

  ACER’s final assessment of the EU wholesale electricity market design ; ACER, April 2022

(16)

  Integrating the EU energy market to foster growth and resilience ; IMF, January 2025. Realising the benefits of European market integration ; Baker et al., 2018; Benefits of an integrated European energy market; Booz et al., 2013

(17)

  ; Joint Research Centre, May 2024

(18)

  Power system flexibility in the Penta region ; Trinomics and Artelys, March 2023

(19)

2025 savings compared to import volumes in 2019, with estimations based on assumptions of 2024 fossil fuel spot prices. With an assumption of 2022 (higher) prices, the annual savings would grow from EUR 140 bn in 2025 (about 0.75% of GDP) to EUR 340 bn in 2030 (1.75% of projected GDP) and up to 600 bn in 2040 (2.7% of projected GDP).

(20)

1.2% of the estimated EU GDP. The 2040 savings are calculated under the assumption of a 90% GHG reduction ambition in 2040.

(21)

From 2020 to 2022, re-dispatching costs almost doubled to EUR 4.2 bn, countertrading doubled to EUR 0.8 bn and other costs decreased to EUR 0.2 bn Congestion management costs are driven by the efficiency in system operations and the cost of electricity supply, which was particularly high in 2022 driven by the energy crisis. Electricity infrastructure development to support a competitive and sustainable energy system ; ACER, Dec. 2024

(22)

Such measures, applied to natural or legal monopolies, are unlikely to constitute State aid and can align with cost-reflectiveness network tariff principles. See points 188 and 211 of the Commission Notice on the Notion of State aid, as well as points 373-375 CEEAG. For the case of the German Hydrogen Backbone, the Commission found such a measure to be compatible State aid (Commission Decision C(2024) 4366 final in case SA.113565).

(23)

  Council Directive 2003/96/EC on the Community framework for the taxation of energy products and electricity

(24)

  State of the Energy Union Report , ‘ EU guidance on energy poverty and Commission Staff Working document Accompanying the 2023 Recommendation on energy poverty; European Commission, 2023.  National fiscal policy responses to the energy crisis ; Bruegel, June 2023

(25)

  Recommendations for future-proof electricity market design in light of the 2021-23 energy crisis ; Pollitt et al., 2024

(26)

The Commission Communication on Fiscal policy guidance for 2024 (COM(2023) 141 final), recommends that Member States should target their measures much better than in the past, refraining from generalised support and only protecting those who need it, namely vulnerable households and firms.

(27)

The Energy Taxation Directive (ETD) 2003/96/EC sets minimum excise duty rates that Member States must apply to energy products, including electricity.

(28)

 The EU VAT Directive 2006/112/EC sets a minimum standard VAT rate of 15% that applies to electricity, natural gas and district heating and allows for a reduced VAT rate of minimum 5%. Council Directive (EU) 2022/542 confirms a reduced VAT rate applicable for electricity at 5%. The application of the reduced rates is decided by Member States. Most businesses can deduct the VAT paid on electricity, provided that the electricity is used for taxable activities.

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Included directly in the bill or within the network charges.

(30)

This refers especially to renewable support scheme levies. Other energy levies (e.g. nuclear decommissioning) are also sometimes introduced. Some Member States may opt to retain some energy-policy costs within the bill where State budgets are very strained and to minimise the risk of substantial national policy swifts. Costs associated with security of supply measures cannot be moved to the budget as this could lead to removing demand response incentives and increasing overall system cost.

(31)

  2024 Market monitoring report on energy retail and consumer protection ; ACER-CEER, September 2024

(32)

 Ibid. Switching rate of electricity household consumers is 7.15%

(33)

  Annual report on the results of monitoring the internal electricity and gas markets in 2021 ; ACER, October 2022

(34)

  Collective energy sharing: CBA and survey evidence of the willingness to invest ; Ovaere, 2023; benefits of 50-50% solar & wind collective self-consumption and surplus energy sold between circa EUR 500-1,100/year (2020-2022).

(35)

 By 2024, a cumulative contracted capacity of 48.4 GW had been signed in the EU (Source: RE-Source )

(36)

Such as credit worthiness, contract complexity and hedging availability. Commercial PPAs ; Baringa for EIB, 2022

(37)

  Phased European Union electricity market reform ; Bruegel, March 2023

(38)

  Renewable power generation costs in 2023 ; IRENA, September 2024

(39)

Beyond streamlining permitting, other factors support the drive down of energy project costs, such as ensuring access to competitive financing conditions, a resilient supply chain with sufficient domestic manufacturing capacity and a skilled workforce, and technological developments.

(40)

  Guidance on EU permitting-related provisions on grid and renewable energy projects ; EU DSO Entity, Jan. 2025

(41)

  Uckermark 115-km 380 kV overhead line project (see S&P )

(42)

  Renewable Energy Directive ; TEN-E Regulation ;  Renewable gas, Natural gas and Hydrogen Market Directive

(43)

15.2 GW in 2024 ( EE-Statistik Auswertung Januar 2025 ). See also Reuters . 

(44)

Such as agri-PV, building-integrated PV (BIPV) and balcony solar systems.

(45)

Concerted Action on the Renewable Energy Sources Directive ( https://www.ca-res.eu/ )

(46)

  Renewable Energy Directive Q&A tool

(47)

  Regulation (EU) 2021/240 establishing a Technical Support Instrument

(48)

  EU Action Plan for Grids  (COM(2023) 757 final)

(49)

  Redispatch and Congestion Management ; Joint Research Centre, May 2024.

(50)

  Electricity infrastructure development to support a competitive and sustainable energy system ; ACER, Dec. 2024

(51)

 Celtic Interconnector from EUR 930M to 1,482M ( CRE ), Biscay Bay from EUR 1,750M to 2,600M ( CRE ). Princess Elisabeth costs are reported to have grown from est. EUR 2.2 bn to EUR 7-8 bn (Brussels Times: 1 and 2 ).

(52)

 In 2024, a SE-DE interconnector was cancelled (see FT ) due to discrepancy on consumer surplus distribution.

(53)

  The road to the next multiannual financial framework (COM(2025) 46 final, pages 5 and 8)

(54)

  Register of Commission Documents (COM(2025)46 )

(55)

Many TSOs in highly meshed areas of the EU power grid made available, on average, between 20% and 50% of the physical capacity of certain network elements in 2023. Thus, far from reaching 70%. Cross-zonal capacities and the 70% margin available for cross-zonal electricity trade ; ACER, July 2023

(56)

  System needs study ; ENTSO-E, May 2023. 64 GW include non-EU peripheric countries.

(57)

  The role of electricity distribution systems in assessing flexibility needs ; Joint Research Centre, 2024

(58)

  Grids for Speed ; Eurelectric, May 2024

(59)

Moreover, technologies like weather sensors can help improve electricity system operation.

(60)

  Demand response and other DER: what barriers are holding them back ; ACER, February 2024

(61)

  2024 Market Monitoring Report on Energy Retail and Consumer Protection ; ACER and CEER, September 2024

(62)

  Energy and climate transition: How to strengthen the EU’s competitiveness ; Business Europe, July 2024

(63)

  Demand-side flexibility: Quantification of benefits in the EU ; DNV for smartEn, September 2022

(64)

  2024 Market monitoring report on energy retail and consumer protection ; ACER-CEER, Sept. 2024 (SE case study)

(65)

 Most households investing annual ranges of EUR 50-145 into home energy management systems (HEMS) that make use of flexible energy systems (such as heat pumps with PVs, PVs with battery storage or electric vehicles), would achieve cost savings. Dodging the electricity price hike: Can demand-side flexibility compensate for spot price increases for households in Germany? ; Stute et al (Fraunhofer Research Institute), February 2024

(66)

  Energy efficiency 2.0 – Engineering the future energy system ; Danfoss Impact Issue no. 4, 2023

(67)

  Demand-side flexibility: Quantification of benefits in the EU ; DNV for smartEn, September 2022

(68)

  Decarbonising for competitiveness: four ways to reduce European energy prices ; Bruegel, December 2024.
It should be noted that the US counts with significant domestic natural gas extraction and therefore it is expected that it has partially lower gas wholesale prices than the EU.

(69)

Including the parameters governing the application of the so-called ancillary activity exemption, the rules on circuit breakers and position limits, the requirements applying to trading venues and market participants, as well as certain aspects of the functioning of spot markets (e.g. the application of requirements similar to those of the financial rulebook to spot energy exchanges).

(70)

  Despite short-term pain, the EU’s liberalised gas markets have brought long-term financial gains ; IEA, 2021

(71)

  European natural gas markets: taking stock and looking forward ; Chyong, March 2019

(72)

EU funding for energy efficiency measures in housing, enterprises and public infrastructure through the European Regional Development Fund (ERDF) and Cohesion Policy (the allocation under the current MFF) amounted EUR 4.9 billion for smart energy systems, EUR 8.9 billion for renewable energy and EUR 21.8 billion for energy.

(73)

An Energy Service Company (ESCO) is an organisation that offers energy services including implementing energy-efficiency projects or renewable energy projects, frequently on a turn-key basis.

(74)

  Energy Performance Contracting in the EU – 2020-2021 ; JRC, 2021 

(75)

  https://eprel.ec.europa.eu/screen/home ; https://webgate.ec.europa.eu/single-market-compliance-space/market-surveillance

(76)

Ecodesign Impact Accounting Status Report 2024, https://circabc.europa.eu/ui/group/418195ae-4919-45fa-a959-3b695c9aab28/library/b29b3be3-8085-4e2f-8095-74ad98d9166c/details , table 2 and figure 2.

(77)

Commission Communication on Ecodesign and Energy Labelling Working Plan 2022-24 (2022/C 182/01)

(78)

 Digital infrastructure accounts for around 3.5% of electricity use in the EU, with data centres responsible for about 70%. Energy consumption in data centres and broadband communication networks in the EU ; JRC, 2024

(79)

  Why European data centres are set for major growth ; Morgan Stanley & Co., July 2024

(80)

  European Council conclusions of 23 March 2023 (EUCO 4/23)

(81)

Commission communication on SET Plan revision (COM(2023) 634 final)

(82)

  Net-Zero Industry Act Regulation  (EU) 2024/1735

(83)

  https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/green.html  

(84)

   Governance of the Energy Union and Climate Action Regulation (EU) 2018/1999

(85)

For example, the State of the Energy Union Report 2024 (COM(2024) 404 final)

(86)

  Energy prices and costs in Europe - European Commission

(87)

  Redispatch and Congestion Management ; Joint Research Centre, May 2024

(88)

 As of 2024, electricity accounts for approximately 23% of the European Union's final energy consumption. 32-33% by 2030 is based on energy system modelling using PRIMES and POTEnCIA. The final energy consumption used to derive the range corresponds to Eurostat definitions (nrg_ind_fecf), i.e. incl. industry, transport, households, services, agriculture and ambient heat from heat pumps, and excluding international aviation and maritime bunkers.

(89)

  Mission Solar 2040: Europe’s Flexibility Revolution ; SolarPower Europe, June 2024

(90)

  Potential of a full EV-power-system-integration in Europe ; T&E conducted by Fraunhofer ISE & ISI, October 2024

(91)

  Implications of digitalisation on future electricity market design ; Oxford Institute for Energy Studies, April 2023

(92)

  Strategic analysis and development plan design on digital transformation in the energy industry ; Liu & Lu, 2021

(93)

  European Wind Charter

(94)

  European Solar Charter

(95)

EU governments’ expenditute on energy represents only 1.1% of our GDP expenditure

( https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Government_expenditure_on_economic_affairs )

(96)

On average in 2000-2021, gross imports of fossil fuels represented about 20% of total merchandise imports, equivalent to 2.8% of the EU’s GDP (based on Eurostat’s trade data for CN code 27). Impact Assessment report accompanying the Commission Communication on Europe’s 2040 climate target (SWD(2024) 63 final, part 3/5)