European policymakers are moving towards a set of decisions on industrial heat that could have major consequences for the continent’s manufacturing base.
The European Commission has already opened consultation processes on both an EU Electrification Action Plan and a new Heating and Cooling Strategy, with adoption foreseen in the second quarter of 2026. Those initiatives are intended to address how electricity can play a larger role in industry, buildings and transport, and they come at a time when the competitiveness of European industry remains under close scrutiny.
The importance of the issue is clear from the scale of industrial energy use in Europe. Eurostat says industry accounted for 24.6% of final energy consumption in the EU in 2023. Within that industrial total, electricity represented 32.6% and natural gas 31.3%, showing that gas remains deeply embedded in European manufacturing. At the same time, the International Energy Agency notes more broadly that heat is the largest energy end-use, accounting for around half of total energy consumption, while industrial processes are responsible for 53% of final energy consumed for heat.
For many years, gas-fired systems provided a workable foundation for industrial heat in sectors such as chemicals, food processing, paper and metals. That model was severely disrupted after Russia’s invasion of Ukraine, which contributed to a sharp rise in European energy costs. Although energy prices have eased from their peak, Eurostat reported this month that EU industrial producer prices for energy in December 2025 were still 66.3% above their January 2021 level. Reuters has also reported continuing pressure on Europe’s industrial base from high energy costs and uncertainty over the policy outlook.
Germany illustrates the wider problem. The country remains Europe’s largest manufacturing economy, yet its chemicals sector has continued to struggle. The German chemical industry association VCI said in late 2025 that no meaningful turnaround was in sight, with chemical production expected to fall and sales to weaken. Reuters separately reported that the sector was running at its lowest capacity utilisation in more than 30 years. These figures reinforce the argument that energy policy is now directly tied to industrial retention and investment decisions.
The Commission’s forthcoming electrification measures are therefore being watched closely by both industry and national governments. Brussels has presented electrification as a central part of the Clean Industrial Deal and the Affordable Energy Action Plan, with the stated aim of speeding up “cost-effective and system-friendly electrification” across industry and other sectors. In practical terms, that means using the 2026 action plan to remove barriers that keep electricity less competitive than fossil fuels in industrial applications.
Research published this week by Agora Industry, drawing on analysis by institutions including Fraunhofer, argues that low and medium-temperature industrial heat is one of the clearest opportunities. The report concludes that electrifying such heat demand can outperform fossil and other low-carbon options under the right conditions. It states that over 2025–2050, costs could fall by about 20% if heat pumps are deployed where feasible and if retail electricity prices remain below three times gas prices. Reuters, citing the same body of work, reported that operating costs in the food and beverage sector could be around 20% lower with electric heat pumps than with gas-fired systems.
That potential is especially relevant for sectors where much of the required heat is at comparatively modest temperatures. The IEA said in December 2025 that in less energy-intensive industrial sectors such as food processing, textiles and machinery production, about 75% of heat demand is below 200°C. According to the agency, that range can often be served by commercially available low-emissions technologies at costs comparable to fossil-based options in certain circumstances. This suggests that at least part of the industrial heat transition is no longer a question of technical feasibility, but of commercial conditions and policy design.
The policy changes under discussion are consequently focused on economics rather than invention alone. Agora Industry argues that accelerated renewables deployment, meaningful carbon pricing and lower electricity taxation are essential if electrification is to become commercially attractive. Industry groups are making similar demands. The Alliance of Energy Intensive Industries has said the success of the EU Electrification Action Plan should be judged by whether it brings industrial electricity costs closer to €50/MWh, while FuelsEurope and other energy-intensive sectors have called for lower grid-related charges, competitive electricity access and continued support for exposed industries.
There are also practical constraints beyond power prices. Faster permitting for clean power projects, quicker grid connections, and stronger financing tools will all be needed if companies are to replace existing gas-based equipment at scale. The Commission’s current consultation material explicitly links electrification with continued investment in clean energy and flexibility, indicating that Brussels sees industrial heat reform as part of a wider restructuring of Europe’s energy system rather than as a stand-alone industrial measure.
The central question for policymakers is whether they can move quickly enough to prevent further erosion of industrial capacity. Reuters reported this week that Europe’s upcoming industrial heat decisions are widely seen as “make or break” because failure to provide a credible route towards cheaper and cleaner energy could deepen factory closures and weaken the region’s industrial base. With the Commission’s electrification and heating packages due in the second quarter of 2026, the next few months are likely to determine whether Europe can offer industry a convincing alternative to prolonged dependence on costly and volatile fossil fuel imports.
