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At the Antwerp Industry Summit, Ursula von der Leyen put the spotlight on a structural imbalance in Europe’s energy system: “We are working with national governments to reduce the tax burden and bring prices down” she said in her opening speech.
As the European Commission prepares Recommendations to Member States on reducing electricity taxes and levies, the question is – what is the state of play across Europe today, and what can realistically change in the short term?
Electricity remains structurally overburdened
Electricity bills across Europe remain heavily loaded with non-energy-related charges that inflate final prices for both households and industry. Household electricity charges in Europe are nearly 15 times higher than in China while industrial electricity charges are around 4 times higher than in China. In most European countries, households pay more than twice as much for electricity as for gas. Industries can pay up to 4 times more.
In some Member States, the distortion is particularly striking:
- In Spain, regulated charges on electricity are 19 times higher than for gas
- In Portugal, regulated charges for household electricity remain significantly higher than for fossil gas, with daily fixed charges still around 4 times higher for electricity
The result is clear: even when wholesale electricity prices fall, end-users continue to face price signals that favour fossil fuels over electrification.
To compound matters further, in some member states, electricity bills still face charges completely unrelated to energy: Greece for example finances its public broadcaster Hellenic Broadcasting Corporation (ERT) through a mandatory broadcasting fee collected via electricity bills. Italy also still collects the “Canone RAI”, the public broadcasting licence fee, via household electricity bills.
A direct barrier to electrification
This imbalance is a structural barrier to Europe’s climate and industrial goals. And this has a direct impact on consumer’s willingness to switch to electricity. Take heat pumps as an example. Heat pumps are up to five times more efficient than conventional fossil fuel boilers. Yet for them to be the easiest choice for consumers, the electricity-to-gas price ratio should be around 2 or below. In many Member States, this ratio remains significantly higher (on average 2.5 across Member States, with some reaching 4).
The same logic applies to industrial electrification, electric vehicles, electric boilers, and demand-side flexibility solutions. As long as electricity is systematically overtaxed in relation to fossil fuels, investment decisions will be hampered – slowing decarbonisation and weakening Europe’s competitiveness.
What can Member States do now?
The good news is that action does not require a full overhaul of EU legislation. Under the current framework, Member States already have several levers they can use:
- Lower excise duties and VAT on electricity
- Remove non-energy-related levies from electricity bills and shift them to general budgets
- Phase out fossil fuel subsidies and ensure electricity is taxed less than fossil fuels
- Keep the electricity-to-fuel price ratio below 2, with corrective measures where necessary
- Prevent double taxation of storage and bidirectional charging to support flexibility and electrified transport
These are concrete, immediately actionable steps and in the last few months we have seen Austria, Denmark and Belgium all rely on some of these measures.
A competitiveness and fairness issue
Rebalancing taxes and levies is not just about subsidising electricity – it’s mostly about correcting a legacy structure that made sense in a fossil-based system but no longer aligns with Europe’s energy mix and strategic priorities. Europe’s electricity system is now ¾ clean and getting cleaner by the week. It’s gone from being a health challenge to being the healthy choice.
If Member States act decisively on taxation and levies, household energy bills can better reflect efficiency gains from electrification, industry can invest in electrified processes with greater certainty, demand-side flexibility can scale, and the energy transition can accelerate without adding new public spending.
Reducing the structural overburdening of electricity is one of the fastest ways to align price signals with climate goals, industrial strategy, and consumer interests.
The debate is no longer whether electrification is needed but whether Europe’s fiscal framework will finally stop penalising it.
You can see Adrian Hiel, Director of the Electrification Alliance talk about the imbalances taxes and levies create here:
News
News from the Electrification Alliance:
We are launching a new video format on LinkedIn: the interview series! Quick and easy videos showcasing the work of our Electrification Alliance members. The first two are already out. You want to learn more about how taxes and levies affect electricity prices? Check out this interview of Electrification Alliance Director Adrian Hiel. If you want to learn more about Eurelectric‘s new battle tested power systems report, check out the member interview!
The Electrification Staircase is officially available online. Please reach out with your comments, reactions and suggestions to staircase@electrification-alliance.eu
News from members:
In February, smartEn Smart Energy Europe released two new reports that expose a growing gap between Europe’s flexibility ambitions and what is actually being delivered on the ground. The Market Monitor 2025 on Demand-Side Flexibility and the smartEn Map 2025 on the Flexible Demand Management Industry (FDMI) together provide a comprehensive snapshot of DSF markets, regulatory progress, technologies, and service providers across Europe. Read the full news item to explore the key findings and what they mean for Europe’s energy transition.
The International Copper Association, together with a coalition of industry associations, raised concerns over the planned revision of EU ETS fallback benchmarks for 2026–2030. Read the whole letter here. The International Coper Association also successfully concluded its La magia del Cobre event in Chile last week, following three months of successful activities. Building on its strong results, the association is now preparing to bring the event to Europe in the coming months. A video recap from the first edition is available to watch here.
EuropeOn – The European Electrical Contractors Association took part in the launch of the VET Students Advisory Board at the European Parliament, an initiative aimed at strengthening cooperation with vocational education and training (VET) students across Europe. Find out more here.
Renewables Grid Initiative launched a new set of good practices showcasing real-world application of measures and plans for climate-proofing electricity grids by European grid operators at all voltage levels. In parallel, RGI also released a dataset of different climate hazards that pose risks to electricity grids and corresponding adaptation and resilience measures. Both the dataset and practices are to be updated over time, as more information becomes available. RGI invites grid operators and other stakeholders to contribute to its pool of adaptation good practices. On 12 February RGI, ENTSO-E and the Italian Transmission System Operator Terna SpA took part in a The World Bank Group webinar dedicated to climate-proofing electricity grids, examining methodological and real-world application of climate-risk assessments in grid development. See the webinar’s slides and links to the recording here.
The European Heat Pump Association explored recent initiatives in Flanders and the Netherlands aimed at accelerating heat pump deployment through stronger collaboration between governments and industry. Read more here.
SolarPower Europe launched its pioneering ‘Technical Due Diligence Best Practice Guidelines for Hybrid Utility Solar PV & Battery Energy Storage Systems,’ and an updated ‘Engineering, Procurement & Construction Best Practice Guidelines Version 3.0,’ at its annual Solar Quality Summit Event. You can read the press release here. SolarPower Europe also published a statement reacting to the informal EU leaders’ retreat in Alden Biesen last week, highlighted the urgent need to strengthen Europe’s industrial competitiveness. You can read the statement here.
WindEurope released it’s Annual Stats Report for 2025. Wind energy continues to strengthen Europe’s industrial competitiveness and energy security. In 2025 Europe built 19 GW of new wind energy capacity. Europe also invested €45bn in additional wind energy projects to be built over the next years. But political considerations to reform the EU electricity market design and to renegotiate the EU Emissions Trading System (ETS) threaten to undermine the progress made in 2025.
Live from the Munich Security Conference, Eurelectric released Battle-tested power systems, a new report examining how Europe’s electricity sector is strengthening resilience in the face of an evolving threat landscape. Drawing lessons from Ukraine and recent hybrid attacks, the report highlights the need to reinforce critical energy infrastructure, improve preparedness and strengthen coordination between utilities, governments and EU institutions to safeguard Europe’s power systems. And happening as we speak at EVision 2026 Eurelectric just released Fleet Forward: Powering the Transition to Electric Mobility, showing how electrifying corporate fleets, which represent around 60% of new vehicle registrations, can strengthen Europe’s competitiveness and deliver up to €246 billion in operating cost savings by 2030.
This article was originially posted as part of the Watt’s Next Electrification Alliance newsletter. For timely updates subscribe here.