European power demand to rise by 25-50% by 2035

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European power demand to rise by 25-50% by 2035
Electrification is key for the energy transition; e-mobility, H2 and green heat all require more renewable energy

EU electricity generation at 2,771 TWh in 2020 was significantly lower than in 2011 and only marginally higher than in 2001, despite the EU economy more than doubling in size in terms of GDP.

The last decade, however, has been tough.

It began with the aftermath of the 2008/09 financial crisis, before leading to European debt crises in 2014/15 and ended with the Covid-19 pandemic. Europe overall has suffered a decade of low economic growth which has left the economy smaller in 2020 than it was in 2011.

2010s: weak economic growth, falling demand for electricity

Although other factors, such as increasing energy efficiency and technological innovation, have played important roles, weak economic growth has been a major factor underlying limited growth in electricity demand.

Russia’s invasion of Ukraine means Europe again faces a crisis, one which threatens to tip it into recession. European consumers face high energy prices and rising inflation for basic goods. If this affects economic growth, electricity demand is likely to take a fourth consecutive knock in less than 15 years.

Trend in EU electricity generation based on selected countries

in terawatt hours, source: BP Review of World Energy, 2021

Energy transition

Yet amid the headwinds buffeting Europe, the region is forging ahead with the energy transition, pursuing renewable energy in particular to provide power which is at once domestically-generated, affordable and clean.

Shifting energy use from imported fossil fuels to home-grown electrons means, from a period of relative stasis, electricity demand is likely to grow more strongly in future. This, in turn, will require much greater investment in clean power generation and grid infrastructure.

The transformation needed to reach net zero by carbon by 2050 is huge. In 2020, the EU sourced just over 70% of its primary energy from fossil fuels, creating large import dependencies. Shifting even a proportion of fossil fuel use to electricity means power demand is likely to rise, while energy supply will become more secure.

Sources of growth

Electric Vehicles (EVs): Despite difficult economic conditions and higher efficiency demands, EV sales continue to grow as a proportion of total vehicle sales.

In 2021, 2,272,666 new passenger plug-in cars were registered in Europe, 66% higher than in 2020. The average plug-in electric car market share in 2021 reached 19%. The EU also saw more than 3,000 new electric bus registrations last year, up 79%.

Consultants Timera Energy have taken a look at the UK market and estimate that a 26% fleet penetration of EVs by 2030 would result in incremental power demand of 27 TWh and that 90% penetration by 2040 would require an additional 96 TWh. According to government data, UK power generation in 2020 was 330 TWh.

Similarly, in an earlier report, consultants McKinsey estimated that a 9% share of the passenger car market for EVs in Germany would increase electricity demand by 9 TWh and a 40% share by 40 TWh. Germany’s total power generation in 2020 was 572 TWh.

Electrolysers: Hydrogen production via electrolysis is another important source of potential power demand growth. Across Europe, electrolysers are seen as a means of turning renewable electricity into green hydrogen for use in transport and industry. While hydrogen is a gas fuel, it is a way of electrifying industry since, in net zero carbon pathways, the majority of hydrogen is produced from renewable energy.

The EU has a target of 40 GW of electrolyser capacity by 2030 with the aim of producing 10 million mt/yr of hydrogen. The UK has a target of 10 GW of hydrogen production capacity by 2030, 5 GW of which to be met by electrolysers. Timera estimates that 5 GW of electrolysers would add 14 TWh of electricity demand. By extension, the EU’s 40 GW target implies an increase of 112 TWh.

Heat provision: Heat is a critical area where electrification can achieve decarbonisation. In December, Germany ruled that new heating systems installed after 1 January 2025 have to run on renewable energy. France has also put subsidies in place to support the adoption of heat pumps. The EU’s REPowerEU envisages 30 million heat pumps by 2030.

Timera estimates that the installation of 3 million heat pumps to displace gas boilers in the UK would add 33 TWh of electricity demand. This implies the EU target would require 330 TWh of incremental electricity demand by 2030.

Overall growth

In stark contrast to the period 2001-2020, Timera forecasts that European electricity demand will rise by 25-50% by 2035 from current levels and may even need to double by 2050 in order to meet net zero carbon targets.

Indeed, the range of forecast growth is large, depending on the speed and extent of adoption of particular energy transition technologies, and the rate of improved energy efficiency, but there is no question that the direction of travel is up.

According to different scenarios formulated by the UK’s National Grid ESO and the Climate Change Committee, UK electricity demand could be anywhere between 19%-61% higher by 2035, and from 52%-144% above current levels by 2050.

With similar targets in place and the same technologies on hand, the EU is likely to experience a similar trajectory.

EU primary energy demand 2020

in percent, source: BP Review of World Energy, 2021

Meeting peak load

Within this there is also the question of baseload versus peak load demand. Electricity demand is not constant, but varies throughout the day and night.

Increases in demand from EVs, hydrogen production and heat are likley to increase peak load demand or change the times when peaks typically occur. This will need to be addressed by smart management and technology on both the demand and supply sides of the electricity market.

It may even be that sources of new power demand, for example EV batteries and hydrogen, can be used to mitigate increases in peak demand and changes in the demand curve.

What is clear, however, is that electrification is central to the achievement not just of power sector decarbonisation but that of the wider European economy and thus achieving net zero by 2050. That means more electricity generation capacity, enhanced grids and ever-smarter demand and supply management.

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