For the European industrial base, the question is no longer whether to decarbonize, but how to do so affordably and fast enough to stay ahead in global markets.
High energy prices pose a particularly large threat to long-term sustainable growth. According to the EU’s report on energy prices and costs in Europe published earlier this year, electricity prices are still 2-4 times higher than the EU’s main trading partners. For EU-based energy-intensive industries specifically, average electricity prices remain roughly twice the levels in the United States, and 50% above those in China.
So, what’s the solution? While phasing out fossil fuels is essential, a clean energy supply alone won’t cut it. The answer is much simpler (and quite obvious): before producing new, cleaner energy, we must make sure that we’re using less of it.
Energy efficiency: a competitive advantage
Energy efficiency remains the single most cost-effective tool to succeed in industrial decarbonization. It’s predicted to be responsible for 70% of the oil demand reduction and 50% of the gas demand reduction by 2050.
In the EU, efficiency has already delivered huge gains. For example, final energy consumption in 2022 would have been about 27% higher without efficiency improvements since 2000. This is equivalent to saving 240 million tons of oil, with industry and households accounting for 77% of that reduction. Not to mention that it can help reduce reliance on imported fossil fuels, potentially being able to save the EU €33 billion annually in fossil fuel imports by 2030.
In the industrial sector, good energy management can lead to more than 10% in annual energy cost savings within three years, and up to 60% over the longer term as new savings are uncovered. The International Energy Agency also notes that countries with top-performing industrial bases each have strong energy management policies.
As investors are driven by predictability and security, better end-use management is now an imperative.
The jolt Europe needs – the implementation of energy efficiency measures
The Energy Efficiency Directive (EED) that was revised and finalized in 2023 is more than a regulatory requirement; it’s a blueprint for a cleaner, more resilient, and competitive Europe. Member States had until 11 October 2025 to transpose the EED into their national law, with 16 EU countries having already adopted national measures to comply with the directive.
One of the key changes is found in Article 11, which focuses on how companies manage and track their energy use. Big energy users, i.e. companies that have used more than 85 terajoules (around 23.5 GWh) of energy per year on average over the past three years, must now set up an energy management system. SMEs and mid-sized users that consume less energy must also carry out an energy audit every four years to identify where they can save energy. Companies must publish plans based on the audit findings, show what measures they’ve implemented, and report their progress every year.
Progress to implement the legislation across the EU may be uneven, but the path is clear: prioritize energy efficiency, leverage digital solutions, and embrace electrification.
Data centers: the early energy efficiency test case
Data centers are a good example of why energy efficiency matters now. With power demands from European data centers projected to reach 168 TWh by 2030 from 96 TWh in 2024, they’re a high-impact sector explicitly addressed in the revised EED.
Under Article 12 of the EED, operators and owners of data centers with an installed IT power demand of 500 kW or more, must report key performance indicators annually. All this data feeds into a wider European database, making performance visible and holding operators accountable.
Some countries have already made good progress:
- Germany’s Energy Efficiency Act (EnEfG) lowers the reporting threshold to 300 kW and enforces data disclosure, with fines of up to €50,000 for non-compliance.
- France introduced reporting obligations for data centers above 100 kW (below the EU 500 kW threshold) and mandates waste heat recovery for centers above 1 MW. Fines for non-compliance can also reach €50,000.
These efforts are promising, but fragmented. To avoid added costs and complexity from double reporting for companies operating across borders while securing real energy savings, member states must harmonize and accelerate implementation.
While Europe’s energy efficiency efforts are improving, rising data center demand is meeting critical bottlenecks. Grid connection delays now reach 7–10 years, while high reliance on non-decarbonized power continues to raise environmental concerns.
To address this, the EU will introduce a data center energy efficiency package in early 2026. It will include a European label covering energy and water use, renewable sourcing, and strengthened monitoring and reporting requirements, especially for high-consumption sites.
But regulation on reporting alone isn’t enough. Data centers must shift from being passive energy users to active grid assets. Technology already exists to enable facilities to support grid stability, and even supply power back when needed. This transforms data centers from grid bottlenecks into flexibility assets.
However, the right incentives are needed to decarbonize. This means investing early in infrastructure adequacy, setting clear and transparent criteria for access to grid connection, and ensuring efficiency metrics are adequate to capture the true efficiency of infrastructure and computer hardware, including contributions to flexibility.
Europe now faces a choice: let AI growth outpace infrastructure, or modernize the grid with a regulatory framework that aligns efficiency and digitalization with decarbonization.
What’s next for European industry – and for Europe as a whole?
In 2026, the EU is set to review the energy efficiency framework as part of its updated Energy Union in the decade after 2030. It remains uncertain whether this process will also reopen the EED, but one thing is clear: before considering revisions, the EU must ensure full and effective implementation of the legislation already in place.
Energy efficiency is the engine of Europe’s clean industrial competitiveness. It can no longer be treated as a ‘nice to have’. It needs to become a core principle guiding investment decisions, backed by a robust and predictable European financing framework.
To meet the EED’s goals and unlock the full benefits of energy efficiency, European industry must embrace electrification and digitalization, what we at Schneider Electric call Electricity 4.0.:
- Electrify – direct electrification from clean energy resources across industry, transport, and heating can triple energy efficiency compared to fossil systems and save €150 billion per year in fossil fuel imports. The EU’s electrification rate has stagnated at 21% in recent years, far below the 32% target for 2030.
- Digitalize – Smart technologies such as meters, sensors, and energy management systems help track consumption, detect inefficiencies, identify optimization opportunities and cut costs – ensuring every investment delivers measurable results.
Combining electrification with digitalization creates a virtuous cycle: smarter energy systems drive efficiency, enable more renewables, and strengthen grid resilience.
Crucially, through coordinated action and targeted support, the EU can turn energy efficiency into its strongest asset for competitiveness, affordability, and security.
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