Cheap electricity cannot solve Europe’s productivity gap by itself, but it can raise energy productivity, support automation and reduce recurring fossil-fuel exposure.
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Europe is running out of workers while still debating how long to preserve machines that burn imported fuel. That is an odd starting point for a competitiveness strategy. Europe’s central economic problem is not electricity prices alone. Mario Draghi’s competitiveness diagnosis is broader: weak productivity, fragmented markets, difficulty turning research and savings into large new companies, and worsening demographics all matter. Cheap megawatt-hours will not create a European Nvidia or complete the single market. But electricity becomes much more important when the question changes from “What is Europe’s biggest problem?” to “What can Europe do that helps several of its biggest problems at once?”
China supplied one of those stress tests this year. During the Strait of Hormuz crisis, Chinese oil consumption fell about 9% in the second quarter and transport oil use fell about 16%. Yet surface transportation did not collapse with it: passenger activity, freight volumes and rail use broadly continued growing. The important caveat is that electrification did not cause the entire fall in oil consumption. Inventories, prices, weak construction, public transport and lower aviation activity also mattered. But the Carbon Brief analysis of China’s Q2 emissions shows why the existing electric capital stock mattered: EVs and electric trucks gave businesses and households an adjustment mechanism that a petroleum-dominated transport system would not have had.
