20. 07. 2026
AUTHOR: Linda Kalcher
This opinion piece was originally published by Table Media.
The European Commission published its Electrification Action Plan, setting an indicative target to electrify 46% of the EU economy by 2040. This is the bare minimum to reap all the benefits of electrification, notably on energy security and industrial benefits, but might be insufficient to catch up with China, which plans to reach a 35% rate in 2030 already.
It still marks a shift: for the first time, the EU treats electrification as the organising principle of its energy policy, rather than one measure among several. After years of policy debates focused on cushioning high energy costs, the EU has set out a structural answer instead. The question now is whether Germany, home to the production of much of the technology this shift depends on, moves in this direction or waits on the sidelines while others capture the industrial benefits first.
Germany has experienced two major geopolitical shocks in quick succession. Russia’s invasion of Ukraine has already laid bare the economic costs of dependence on imported fossil fuels. Most recently, the war in the Middle East has once again driven up energy prices for businesses and households.
Germany still imports around 70 per cent of its energy consumption, making its economy vulnerable to such uncontrollable events. Fossil fuels continue to account for the largest share of Germany’s energy mix: oil accounts for 39 per cent of final energy consumption, natural gas for 25 per cent and coal for around 3 per cent. However, rather than reducing this structural dependence, the political debate continues to focus on damage limitation – for example, through the gas and electricity price caps or the industrial electricity price scheme. This has placed a strain on the tight budget and alleviated immediate pressure, but once again has failed to build resilience against future price shocks.
Electricity prices in Spain are lower due to the high share of renewables. Whilst average wholesale electricity prices in Spain stood at around 63 €/MWh, compared with around 79 €/MWh in Germany. Spain has combined the expansion of renewable energy with accelerated investment in electrification – including solar energy, battery storage and the roll-out of electric vehicles (EVs) – and Germany could achieve similar benefits.
Germany has strong industrial value creation in the electrical engineering sector with significant potential once demand is stimulated: Siemens and Phoenix Contact supply grid and industrial electrification technology; Bosch and Viessmann Climate Solutions produce heat pumps and electric mobility technologies; whilst SMA Solar Technology specialises in the integration of solar and battery technology.
A structural problem, not a temporary shock
The 2022 energy crisis has shown how quickly dependence on fossil fuels can affect industrial competitiveness. BASF, for example, announced the loss of 2,600 jobs and a reduction in production at its Ludwigshafen site, as high energy costs were weighing on its European business.
The International Energy Agency has warned that continued dependence on gas remains a challenge for German industry. The best way forward is faster electrification based on renewables. Whilst Minister Reiche supports a European target for renewable energy by 2040, Germany’s position on electrification remains vague, and domestic policy measures do not provide a clear direction from which businesses would benefit. Grid connection, tax reform in favour of electrification, infrastructure modernisation, digitalisation and storage are key areas in which German companies expect the government to make progress.
Electrification as an industrial strategy
Electrification is becoming a key driver of industrial competitiveness. As global markets for electrical engineering grow, China aims to claim a growing share of future value creation, which is projected to reach 620 billion US dollars by 2035. German industry can keep pace here, provided that a larger domestic and European market for electrical engineering is also created.
Progress in Germany is visible, but too slow. Electric vehicles have overtaken petrol and Diesel cars in new registrations – since the start of the war in Iran – and sales of heat pumps exceeded those of gas heating systems in 2025. Renewable energies accounted for 55.9 per cent of net public electricity generation in 2025. However, China has developed more rapidly in the fields of electric vehicles, batteries and cleantech manufacturing, and is threatening to establish a monopoly in the field of electrification. Without stronger market signals and legislation, Germany risks losing market share in technologies where it already possesses industrial expertise.
Based on the Electrification Action Plan published today, the European Commission can make electrification the central pillar of the “Energy Security Framework,” which is revised in the autumn. The future energy system can only be secure and affordable if fossil fuel imports are minimised. Furthermore, this would provide German manufacturers with a larger domestic market and strengthen their international competitiveness.
Germany’s current, hesitant stance on electrification is becoming increasingly difficult to justify. Minister Katherina Reiche’s support for the Action Plan would send a strong signal that Germany sees electrification not only as an energy policy but as a strategy for competitiveness, resilience, and long-term economic security.
As discussions on electrification and energy security continue in Brussels, Germany has an opportunity to translate its long-standing industrial strengths into a clear European position.
