The EU is at a crucial turning point for its competitiveness, decarbonisation and security, with a clear need to act. Structurally high energy costs are hurting our citizens and businesses. The challenges are clear, and so is the role of the European Union to address them. Today, the Commission is putting forward an Action Plan with short-term measures to lower energy costs, complete the Energy Union, attract investments and be better prepared for potential energy crises.
As a key component of the Clean Industrial Deal, this Plan will not only bring relief to households facing high energy bills, but also to industries that struggle with high production costs, with estimated overall savings of €45 billion in 2025, that will progressively increase until €130 billion in annual savings by 2030 and €260 billion by 2040.
The Action Plan will bring short-term relief to consumers and pave the way for the completion of the Energy Union by frontloading the benefits of more renewable energy, energy savings, deeper market integration and better interconnections. Crucially, it proposes actions to tackle the structural challenges that are driving up energy costs in the EU, notably Europe’s reliance on imported fossil fuels and lack of full integration of the electricity system. The Plan builds on the recent reform of the Electricity Market Design, the REPowerEU Plan, sector-specific blueprints for wind, solar and grids and revised energy and climate legislation under the Fit for 55 package.
By accelerating investments in clean energy and infrastructure, and by bringing transparency and fairness to gas markets, energy can be made more affordable. A further reduction of permitting times for renewables and energy infrastructure will also help lowering power production costs. Consumers already benefit from around €34 billion every year thanks to the EU’s internal energy market. Further integration could raise such benefits up to €40-43 billion per year already by 2030.
President Ursula von der Leyen said:” We’re driving energy prices down and competitiveness up. We have already significantly reduced energy prices in Europe by doubling down on renewables. Now, we are going a step further with the Affordable Energy Action Plan as part of our Clean Industrial Deal. With it, we will achieve more predictable prices, stronger connections across Europe, and increased energy offtake. We will systematically remove remaining obstacles so that we can build a true Energy Union.”
Lowering energy costs to provide immediate relief to consumers while completing the Energy Union
To make electricity more affordable, the Commission will tackle all three components of energy bills, namely network and system costs, taxes and levies and supply costs. We will make recommendations to the Member States to lower national taxes on electricity and enable consumers to switch suppliers more easily towards cheaper energy offers, among others. Building on existing EU electricity legislation, the Commission will also further support the uptake of long-term supply contracts which ultimately help break the link between retail electricity bills and high and volatile gas prices. To lower the network charges part of the energy bill, it will propose a methodology to ensure network charges reflect the costs of the energy system, incentivising the most efficient use of the grid.
Together with support to bring more and faster renewables, the Commission will also bring about significant benefits for consumers by supporting a broader uptake of energy efficiency solutions, which can lead to savings of up to €162 billion per year in 2030. An EU guarantee scheme to be developed in cooperation with the European Investment Bank will help de-risk investment in energy efficiency services and facilitate access to more efficient appliances and products with longer lifetimes.
EU gas prices are too high and are affecting the competitiveness of the European industry. To ensure fair competition, the Commission will step up its scrutiny of the EU gas markets with the help of the Agency for the Cooperation of Energy Regulators (ACER), the European Securities and Markets Authority (ESMA) and national regulators. We will also engage with reliable LNG suppliers to identify additional cost-competitive imports and harness the Union’s purchasing power by aggregating demand from EU companies.
Ultimately, deeper integrated, well-functioning and decarbonised energy markets are the best shield against price volatility. This is why the Commission will strive to complete the Energy Union, with more interconnectors, a stronger grid and cross-border trading, and will roll out a set of initiatives to boost electrification and the decarbonisation of the heating and cooling sectors, to mobilise private capital and further digitalise the energy system, among others.
Being better prepared for potential crises
Security of supply is key to ensure prices remain stable. The Commission will update the EU energy security framework to address emerging threats such as cyber-attacks, critical infrastructure sabotage and risks from reliance on imports. It will also step up preparedness for potential price crisis, among others, by issuing guidance to Member States on how to reward consumers to reduce consumption at peak times and keep energy bills in check.
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Quote(s)
We’re driving energy prices down and competitiveness up. We have already significantly reduced energy prices in Europe by doubling down on renewables. Now, we are going a step further with the Affordable Energy Action Plan as part of our Clean Industrial Deal. With it, we will achieve more predictable prices, stronger connections across Europe, and increased energy offtake. We will systematically remove remaining obstacles so that we can build a true Energy Union.
There can be no clean transition without access to affordable energy for all. By bringing down energy bills, this Action Plan will benefit European citizens and ensure European businesses stay the course on decarbonisation, thrive economically and become more competitive on the global stage. At the same time, it will ensure that the transition remains a socially fair process, leaving no one behind.”
Today’s challenges demand bold and ambitious actions to both reduce energy prices and safeguard our security. The answer to these challenges lies in a cleaner, cheaper, more efficient and connected Energy Union. This is why we will not step back on the green transition. We will step forward, with determination and urgency.
Source – EU Commission
EU Commission Q&A on the Action Plan for Affordable Energy
Brussels, 26 February 2025
Why do we need this Action Plan?
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.
Today, however, there is a clear and urgent need to strengthen our Energy Union. High energy costs are hurting our citizens and businesses. Energy poverty affects more than 46 million Europeans, whilst for industries, retail electricity prices have almost doubled. The current situation undermines the EU’s global standing and international competitiveness.
As a key component of 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. It will 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.
What is driving up energy costs in the EU?
Energy bills are determined by a combination of 3 main elements: energy supply costs linked to the overall level of consumption, network costs, and excise levies and taxation. Energy supply costs depend on wholesale prices, which in turn are driven by diverse factors such as supply and demand conditions, energy mix, interconnections, competition between energy producers and other market actors, weather and geopolitical realities, as well as retail competition among suppliers.
The EU energy system faces specific structural challenges that are driving up energy prices. First, Europe still relies largely on imported fossil fuels. This causes energy price volatility and higher supply costs and makes the EU more vulnerable to external pressure and global market uncertainty.
Secondly, 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 further upscale integration of cheaper and cleaner energy sources.
Finally, there are increasing system costs covered by network charges and taxes and levies which further drive up electricity prices. This constitutes a substantial part of the energy the bill. As things stand, this may increase further in future as our networks will need considerable investments in the coming years.
How will this Action Plan help lower energy costs for Europeans?
The Action Plan combines measures to lower energy bills in the short term with cost-saving structural reforms that will reinforce our energy system and make it more resilient against potential future price shocks. Crucially, it addresses all three price components of the energy bills, notably energy supply costs, network charges, and taxes and levies, in order to be as effective as possible. The full engagement of Member States and all relevant stakeholders will be key to reduce energy costs and help build a genuine Energy Union that delivers competitiveness, security, decarbonisation and a just transition, passing on to all European consumers the benefits of cleaner and cheaper energy.
More immediate actions, such as tax reductions for electricity, can be taken by the Member States to provide immediate relief to consumers. The Commission will support with guidance as well as with the design of tariff methodologies for network charges to help lower energy system costs and grid investment needs.
In addition, the Action Plan will bring down the costs of electricity supply. The Commission will provide guidance to Member States to bring down existing barriers so that consumers can save on their energy bills by switching to a more competitive supplier or shifting their consumption to times of lower prices. Energy efficient products lower energy bills immediately. To give consumers access to more efficient appliances and products with longer lifetimes, our plan also urges Member States, national market surveillance and custom authorities to strengthen national market surveillance and enforcement against non-compliant products imported from third countries.
The Plan will help ensure that retail electricity bills are not dictated by high and volatile gas prices thanks to a broader uptake of long-term contracts for clean power. These can provide investment certainty to producers as well as price stability to energy-consuming industries. Given that the increase of renewables is key to have lower prices, the Commission will keep supporting Member States to reduce the permitting times for projects and roll out the necessary grid infrastructure, while incentivising flexibility via remuneration in retail contracts for industries and households.
Which actions can be implemented in the immediate term to benefit consumers?
Member States have a key role to play in lowering electricity bills in the very short term. The Commission will offer them support, especially in the areas of taxation and network charges where immediate action can be taken. The Commission will issue a recommendation to Member States on how to lower taxation levels in electricity in an effective way and how best to take advantage of existing possibilities to decrease taxes down to zero for energy-intensive industries and households. It is also key to Member States reach a political agreement on the revision of the Energy Taxation Directive, which aims to remove outdated reduced rates that currently encourage the use of fossil fuels.
With regard to network charges, the Commission will put forward a new design of tariff methodologies for network charges to enable users of the grids to adjust or shift energy use towards times and places where the cheapest energy sources are available and when it is the most cost efficient for the overall system. This should help reduce overall costs of the system and thus have a lower impact on the energy bill.
How will European industries have access to affordable energy?
All the measures proposed in the Plan will support the competitiveness of the European industry by bringing about lower energy costs, both in the immediate term and in the longer run as we complete the Energy Union with more initiatives to roll out clean energy, boost security of supply and increasing the supervision of gas markets.
The Commission will aim at reducing barriers for energy-intensive industries to conclude long-term energy contracts by supporting national regimes and introducing derisking tools. For example, the Commission will launch (jointly with the European Investment Bank) a pilot programme for corporate Power Purchase Agreements (PPAs), and will provide guidance to Member States to enable them to combine long-term contracts, notably PPAs and Contracts for Difference.
For the industry, the Action Plan introduces the concept of a “Tripartite Contract for Affordable Energy”, a form of cooperation between the public sector, including financial institutions, energy-consuming industries and clean energy developers, so that they can create an investment climate that supports cost-effective energy production, reliable energy supply, and long-term economic growth for all stakeholders. It will bring predictability and scaling for energy generators, who will have a secure buyer for their production, and for energy purchasers, who will benefit from affordable and stable energy supply. Furthermore, the support offered by the Commission, the European Investment Bank and the Member States will further help to derisk investment and allow businesses to grow.
What are the new measures to support the clean energy transition?
Swift and full implementation of existing EU electricity legislation is crucial to keep increasing the share of renewables and reduce the cost of electricity supply: recently adopted rules on permitting, contracts, flexibility, consumer empowerment and market surveillance can already deliver lower costs, if properly implemented in the Member States.
But more needs to be done. Since 2022, a record of 205 GW solar and wind capacity has been installed in the EU. In 2024, around 47% of the EU’s electricity supply came from renewables. The International Energy Agency (IEA) estimates savings of €100 billion in 2021- 2023 resulting from renewable energy instalments. The Commission will continue supporting the Member States in further accelerating permitting procedures. It will table new legislation to accelerate permitting for grids, storage and renewables as part of a European Grid Package.
Furthermore, the Commission will boost flexibility by clarifying the State aid requirements for non-fossil flexibility schemes and adopt new rules on demand response to ensure that consumers can take full financial advantage of this flexibility, to make sure energy is used when it is cheaper.
Finally, in cooperation with the EIB, the Commission will explore setting up a guarantee scheme to support financing models that alleviate initial costs for energy efficiency services. Further updates to eco-design and energy labelling rules will also generate more savings for European consumers.
How will this Action Plan ensure fair competition in the gas markets?
The Commission has set up an internal Gas Market Task Force to comprehensively scrutinise EU natural gas markets and, where necessary, take actions to ensure their optimal functioning and prevent commercial practices distorting market-based pricing. It is essential for the European economy that the optimal functioning of the gas market is ensured. This includes the prevention of market abuse (such as market manipulation and insider trading) and other commercial practices distorting market-based prices. Full regulatory oversight and the close cooperation between energy and financial regulators is required to prevent market manipulation and closing any possible loopholes related to lack of transparency, asymmetry of information and risk of market concentration.
How will the Commission ensure that the EU is ready to face potential price shocks?
First, the Plan will help making the EU’s energy system more resilient to external price shocks with an increased share of home-grown renewables, more integrated markets and better supervised gas markets. Efforts to decouple electricity bills from market volatility and price spikes by boosting the uptake of long-term electricity supply contracts will lead to greater price stability for buyers. This will generally help European companies to manage volatility in energy costs.
Additionally, the Commission will revise the current EU energy security regulatory framework to ensure the availability of energy supplies at all times as well as better preparedness for supply stress periods. This will help reduce price volatility and lower prices.
Consumers will also get better protection from price peaks in cases of crises. The Commission will provide guidance to Member States regarding schemes to remunerate consumers to lower energy demand in certain hours of the day. In addition, when necessary, the Commission will work with transmission system operators and national regulatory authorities to ensure temporary increases of electricity flows in the interconnectors in certain situations, to address regional price crises such as the one seen in 2024 in Southeast Europe.
What are the benefits of completing the Energy Union and what is the Commission going to do to achieve it?
The EU has built a strong, interconnected energy market, but it is not yet a genuine Energy Union. EU energy costs remain comparatively high, putting Europe at a real risk of de-industrialisation and placing a critical threat on the economy.
The cost of failing to complete the clean 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, driven, among others, by lack of cross-border capacity and insufficient flexibility that could have been eased by a more interconnected energy system. 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 €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 €5.2 billion in 2022 and could rise to €26 billion by 2030.
Investing €2 billion annually in cross-border networks provide €5 billion in benefits for citizens yearly. Europeans already benefit from €34 billion currently thanks to the internal energy market, which could increase to €40-43 billion with further integration by 2030.
Therefore, the Commission will continue to roll out new initiatives to ensure a fully decarbonised and integrated energy system and market, including on electrification, digitalisation and to address the heating and cooling sectors, among others. We will also present a Clean Energy Investment Strategy and assess the streamlining of licencing practices for new nuclear technologies and continue the work to make Small Modular Reactors commercially viable in Europe in the coming years. A new Energy Union Task Force, which will consist of high-level representatives from the Commission, relevant EU bodies, and stakeholders as needed, will oversee the completion of the Union and regularly report to the President of the Commission, the European Council, the Energy Council and the European Parliament.
Source – EU Commission