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Glossary · Energy industry & energy transition

Electrification

Electrification power system energy transition Efficiency heat pump Electromobility flexibility Decarbonization sector coupling electricity consumption grid expansion

Electrification refers to the switch to electricity of applications that were previously run on fossil or biogenic fuels or on other non-electric energy carriers. Examples are heat pumps instead of oil or gas heating, electric cars instead of combustion-engine vehicles, electric industrial furnaces instead of gas-fired plants, and electric drives instead of hydraulic or pneumatic systems. The need behind the application remains. People still want warm homes, mobility, industrial products or cooled spaces. Electrification only changes the way in which this energy service is provided.

What matters is therefore not only the additional electricity consumption. It is about the relationship between the electrical energy used, the useful energy delivered and the power required at particular points in time. Electricity consumption is measured as a quantity of energy in kilowatt-hours (kWh). Power is measured in kilowatts (kW) or megawatts (MW) and describes how much energy is needed per unit of time. For the power system this distinction is central. A heat pump may need little energy over the year, but on cold days, together with many other heat pumps, it can draw high power at the same time. An electric car may need only a moderate amount of electricity per year, but it can aggravate local grid bottlenecks if it charges in the evening without control.

Putting it into numbers

The International Energy Agency (IEA) usually measures the degree of electrification by the share of electricity in global final energy consumption. In its special report "Electrification" from 2026, it puts this share at around 23 percent for 2025. According to these figures, the electricity share in the buildings sector rose from about 25 percent in 2000 to almost 40 percent in 2025. In transport, despite a growing number of electric vehicles, it was only just under 2 percent. The IEA estimates that with technologies available today and economically competitive, around 33 percent could be reached worldwide. In its high-electrification scenario, the share rises to 35 percent by 2035. This is a scenario calculation, not a forecast and not a binding target.

Efficiency and energy levels

Electrification is often equated with rising energy consumption because more applications need electricity. This equation mixes up several levels: electricity consumption, final energy, useful energy and primary energy. An electric application can increase electricity consumption and at the same time reduce total energy input. This is due to the different conversion chains.

A combustion engine converts only part of the energy in the fuel into motion. A large part is lost as waste heat. According to the IEA, in the predominantly oil-based transport sector around three quarters of the energy input is lost as waste heat. An electric vehicle is accordingly two to four times as efficient as a combustion-engine vehicle. For this reason, the share of electricity in the energy service actually used is larger than its share in final energy.

A heat pump does not generate heat from electricity alone. It lifts ambient heat from air, ground or water to a usable temperature level. One kilowatt-hour of electricity thus yields several kilowatt-hours of heat. Measurements in practice show the order of magnitude: Fraunhofer ISE measured heat pumps in occupied existing one- to three-family houses in Germany. Air-to-water heat pumps achieved an average seasonal performance factor of 3.4, ground-source heat pumps 4.3. The overall range was from 2.6 to 5.4. In the predecessor project up to 2019, the averages were still 3.1 and 4.1.

These values come from limited samples and cannot automatically be transferred to every building. What matters most is which flow temperature is required on the days with the highest heating demand. Heat emitters, system design and operation also play a role. The researchers found no connection between year of construction and efficiency. A heat pump therefore does not replace one kilowatt-hour of gas with one kilowatt-hour of electricity. It replaces a fuel chain with an electrical process of fundamentally different efficiency.

An important point follows for the economic assessment. According to the IEA, electricity is almost always more expensive per kilowatt-hour of final energy than natural gas or petrol, because generation, transport and distribution require costly infrastructure. Electric technology, however, delivers considerably more benefit per kilowatt-hour used. A price comparison based on the kilowatt-hour alone therefore falls short.

This distinction is also important for political and economic debates. If electrification is described only as additional consumption in the power sector, the fuels saved in buildings, transport and industry remain invisible. If it is described only as an efficiency gain, grid capacities, peak loads and investment needs drop out of view. Both simplifications lead to false expectations.

Distinction from sector coupling and decarbonisation

Electrification is closely linked to sector coupling, but is not the same thing. Sector coupling means the connection of areas previously considered separately, such as electricity, heat, transport and industry. Electrification is a particularly important form of it, because electricity moves directly into other fields of application. Sector coupling can, however, also take place via hydrogen, synthetic fuels, heating networks or industrial waste heat. If hydrogen is produced by electrolysis, this is often called indirect electrification. Because of the additional conversion losses, it generally needs considerably more electricity for the same energy service than direct use.

Decarbonisation is also not the same as electrification. An electric application causes no direct CO₂ emissions at the point of use. Its climate impact, however, depends on the electricity mix, on the time of consumption, on the lifetime of the installations and on which energy carriers are replaced. The IEA finds falling emissions in the energy sector in all cases examined. For the full effect, however, a strong expansion of low-emission electricity generation is needed. Fraunhofer ISE calculated the emissions using time-varying electricity emission factors. According to this, the emissions of the heat pumps examined in 2024 were 64 percent lower than those of natural gas heating systems. An inefficient direct electric heater in a poorly insulated building, by contrast, can generate high loads and increase system costs. Switching to electricity is therefore a means of reducing emissions, not a guarantee of it.

The mere digitalisation or automation of applications is likewise not electrification. A heating system can be digitally controlled and still burn gas. An industrial process can run highly automated without being electrified. Conversely, an electric application can run entirely without intelligent control. For the power system, the combination of electrical efficiency and controllable operation becomes particularly important.

Why electrification changes the power system

Through electrification, loads move into the power system that previously lay outside its balance. Heating oil, natural gas, petrol and diesel were stored, transported and burned when needed. With electricity, by contrast, generation, grid capacity and consumption must match at every moment. Storage, imports, flexible power plants, load shifting and grid operation ensure that this simultaneity remains manageable.

As a result, the load profile becomes more important. Not every additional kilowatt-hour burdens the system equally. A kilowatt-hour with which an electric car charges on a windy night has a different effect from the same kilowatt-hour during a local grid peak in the early evening. A heat pump with heat storage and suitable control can temporarily shift its load. Without such options, it can create additional peaks during cold spells. Electrification thus shifts the question from the annual quantity to timing, location, power and controllability.

Concrete tasks for the grids arise from this. The distribution grid must accommodate more connection capacity for charging points, heat pumps and electric commercial processes. Transformers, lines, protection technology and metering systems come under greater strain. Flexible consumers can at the same time help to use existing grids better and to deploy grid expansion in a more targeted way. This only works, however, if tariff structures, technical interfaces and legal rules allow it. Conflicts arise where technical possibility, market rules and responsibilities diverge. A household can charge its car flexibly in time. The grid operator knows the bottleneck, the electricity supplier sets price signals. Regulation determines who may control and who is paid for it.

Legal framework in Germany: grid-oriented control

In Germany, section 14a of the Energy Industry Act (EnWG) regulates how such new loads are integrated into the low-voltage grid. The provision authorises the Federal Network Agency (Bundesnetzagentur) to set nationwide uniform rules. Under these, distribution system operators, suppliers, final consumers and connection users conclude agreements on the grid-oriented control of controllable consumption devices. In return, the operators receive reduced grid charges. As controllable consumption devices, the law names in particular heat pumps, charging points for electric vehicles that are not publicly accessible, installations for cooling or electricity storage, and night storage heaters. The Federal Network Agency's determination may deviate from this. According to the law, it is to give economic incentives and agreements on grid connection capacity priority over the control of individual devices. It is also to oblige grid operators that exercise control to monitor and digitalise their grid more precisely.

The details are not in the law itself but in the Federal Network Agency's determination. They include power thresholds, the minimum power that remains guaranteed when control is applied, transitional periods for existing installations and the modules of the grid charge reduction. According to grid operators, the new rules have applied since 1 January 2024 to newly commissioned installations. The rule concerns only Germany and only installations on the low-voltage grid. Larger industrial consumers on the medium- or high-voltage grid are not covered. Other countries regulate controllability and tariffs differently.

Flexibility as a condition of economic electrification

Electrification increases the need for clean electricity, but can also create new flexibility. Many electric applications do not have to draw electricity at exactly the moment at which the energy service is used. A hot water tank can store heat. An electric car is often parked for many hours although it needs to charge only briefly. Cold stores, battery storage, industrial intermediate products or thermal storage can shift loads in time.

This flexibility does not, however, arise automatically with the installation of electric devices. It needs suitable technology, clear control rights, reliable price signals and rules that take the local grid situation into account. A low electricity price at high feed-in from wind and sun can benefit the system if the grid can absorb the additional load. In an overloaded distribution grid, the same incentive can aggravate the bottleneck. The electricity market and grid operation follow different scarcities: the wholesale market values energy predominantly without regard to location within a price zone. The grid, by contrast, has physical limits at specific lines and transformers.

For consumers, electrification is therefore also an investment decision. A heat pump needs a suitable building and suitable heat emitters, an electric car a charging point. An industrial company often needs new grid connections, transformers or process changes. Operating costs depend on electricity prices, grid charges, levies, fuel prices and possible revenues from flexibility. According to the IEA, the higher initial investments are often offset by lower operating costs. In some cases, however, political support is needed to reduce acquisition costs or to ease access to capital. Institutional rules also help decide whether the technically efficient solution also becomes economically attractive.

Limits of direct electrification

Not every application can be electrified equally easily. The IEA sees economically competitive potential today mainly in space heating, road transport and industrial process heat at low and medium temperature levels. Long-haul flights and maritime shipping, by contrast, are hard to electrify. The same applies to parts of energy-intensive industry, for example processes at very high temperatures or with coal as a raw material. There, hydrogen, synthetic energy carriers or other processes are more likely to come into question.

Typical misinterpretations

  • Electrification as a mere swap of devices: This view underestimates system design and operation. A heat pump works differently from a boiler. Its efficiency depends strongly on the flow temperature. An electric car is not just a car with a different engine, but also a controllable electricity consumer with a battery. An electric industrial process can have different temperature profiles, workflows and maintenance requirements than a gas-based one.

  • Every additional electricity consumption as a burden on the energy transition: Additional electric demand may require the expansion of generation and grids. At the same time, however, it can replace fossil fuels, reduce conversion losses and create flexible demand. The bare consumption figure says little about the impact. What matters is which fossil application is replaced, when the electricity is consumed and how controllable the load is.

  • Every electric load can wait indefinitely for surplus electricity: Electrification fits well with a power system with a lot of wind and solar power, because many new loads can in principle be shifted. Space heating, mobility, industrial production and public infrastructure, however, have their own availability requirements. Flexibility should be used where it is technically and socially viable. Where shifting is possible only to a limited extent, supply must be safeguarded.

  • More expensive electricity per kilowatt-hour automatically means higher costs: Because electric technology is more efficient, the energy service can be cheaper despite higher kilowatt-hour prices. This depends, however, on the specific price ratio between electricity and fuel.

Conclusion

Electrification shows that the energy transition is more than the replacement of generation plants. It changes demand, grids, storage needs, tariff models, device standards, building planning and industrial processes. The term describes the shift of energy services into a power system that must at the same time become cleaner, more capable and better coordinated. Used precisely, electrification does not simply mean more electricity. It means the efficient and controllable use of electricity where it can replace fuels, losses and emissions.

Sources

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Edited by eCMS on 11.11.2026 19:43

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.