The EU electrification plan will drive explosive growth in electricity demand, ushering in a “new era of growth” for the utility industry (Morgan Stanley)
A Morgan Stanley report pointed out that the EU plans to promote the electrification plan and aims to increase the proportion of electricity in final energy consumption from 23% to 46% in 2040.
A Morgan Stanley report pointed out that the EU plans to promote the electrification plan and aims to increase the proportion of electricity in final energy consumption from 23% to 46% in 2040. This will drive EU electricity demand to approximately 5,000 TWh in 2040, with a compound annual growth rate (CAGR) of 4.9% from 2025 to 2040, 50% higher than current forecast levels. The European utility industry will be the core beneficiary, and demand for investment in grid expansion and clean power generation will increase significantly. The market's focus on European utilities is energy transition and regulation, but the report reveals a demand growth prospect that far exceeds expectations, which will completely change the long-term growth logic of the industry. One-sentence conclusion: The EU’s electrification blueprint is the most certain and powerful growth engine for the European utility industry in the next fifteen years. Grid and clean energy operators will usher in unprecedented investment opportunities. Positive/Negative: Positive for the European utility sector, especially grid operators (e.g. Elia, E.ON) and clean energy developers (e.g. Orsted, RWE). The market is far from fully pricing in this long-term growth potential. Catalysts: 1) The EU’s formal legislation to promote electrification goals; 2) Approval and launch of grid expansion investments in various countries; 3) Long-term investment plans and capital expenditure guidance of relevant companies.