Energy prices across Europe have drastically fallen from the 2022 crisis peaks, but they remain significantly higher than pre-crisis levels, causing economic strain on both industries and consumers. Despite these challenges, the EU continues to push forward with its ambitious clean energy transition outlined in the 2024 State of the Energy Union Report.
According to the newly released State of the Energy Union Report 2024, energy prices in Europe have stabilized after the unprecedented spikes of 2022, but they remain elevated compared to historical levels. The report highlights the continued challenges facing European citizens and industries due to lingering high energy costs, despite extensive policy interventions and market adjustments.
The energy crisis, exacerbated by Russia’s invasion of Ukraine and its subsequent weaponization of energy, led to skyrocketing prices in 2022, particularly in the gas and electricity sectors. The EU’s REPowerEU Plan was swiftly implemented to reduce reliance on Russian fossil fuels, diversify energy sources, and stabilize energy markets. While these efforts have successfully brought down prices, the cost of energy remains 2-3 times higher than in the United States** and other global competitors, especially in the industrial sector.
Industrial Competitiveness at Risk
The report highlights that high energy costs are particularly impacting Europe’s industrial competitiveness. Energy-intensive sectors, such as manufacturing, face mounting pressure from global competitors like the US and China, where energy prices are significantly lower. European gas prices, for instance, are reported to be 3-6 times higher than those in the US, compared to 2-3 times higher historically.
This price disparity is making it harder for European industries to compete on the global stage, pushing the EU to accelerate its clean energy transition. The recent Electricity Market Design (EMD) reform, which aims to promote the integration of renewables into the energy market, is one step the EU is taking to address this issue. However, the report acknowledges that further structural changes are needed to ensure affordable and stable energy prices for both businesses and consumers.
Relief Measures for Households and Businesses
To mitigate the impact of these high prices, various support measures have been introduced across EU Member States. National governments have implemented relief packages aimed at easing the burden on households and small businesses, which have borne the brunt of soaring utility bills.
According to the report, 10.6% of EU citizens were unable to keep their homes adequately warm in 2023 due to energy costs—a marked increase from the previous year. The EU is addressing this issue through measures like the Social Climate Fund, which mobilizes over €86 billion to support vulnerable households facing rising energy bills due to the clean energy transition.
Clean Energy Transition: A Long-Term Solution
Despite these challenges, the State of the Energy Union Report emphasizes that the clean energy transition remains the key to ensuring long-term stability and competitiveness. Over the past two years, the EU has made significant strides in scaling up renewable energy production. In 2023 alone, the EU installed 56 GW of new solar capacity and achieved a record 18% reduction in gas demand, helping to alleviate some pressure on energy markets.
“The EU has made impressive progress in reducing its reliance on Russian fossil fuels and expanding its renewable energy base,” the report states. “However, more needs to be done to bring down energy prices to a level that ensures industrial competitiveness and shields consumers from further price shocks.”
Future Outlook
As the EU looks toward its 2030 climate goals, the report underscores the need for further investments in renewable energy and grid infrastructure. The upcoming reforms under the Net-Zero Industry Act and Critical Raw Materials Act aim to strengthen Europe’s clean energy manufacturing base, reducing dependency on external energy sources and lowering prices in the long term.
Nevertheless, the energy price crisis has left an indelible mark on Europe’s economy, and while prices have stabilized, the journey toward affordable and secure energy for all is far from over.
Europe’s energy markets may have stabilized, but the lasting impact of the crisis continues to affect both industries and households. As the EU moves forward with its clean energy agenda, policymakers will need to balance the pressing need for economic competitiveness with the long-term goal of achieving climate neutrality.
Source: The European Commission – State of the Energy Union Report 2024