Electrification and Stocks: As Progress Stalls, Who Benefits?

Electrification is the process of converting energy-intensive equipment and industries to electric power. In the short term, electrification can cause price hikes as electricity demand increases. But in the long run, the process can lower costs through reduced reliance on fossil fuels and improved energy efficiency.

Today Europe is stuck in an awkward in-between position: It incurs the costs associated with decarbonization without achieving the scale to unlock growth. But we’ve found pockets of opportunity as Europe’s electrification hits stall speed.

Here, we’ll break down investment themes and stocks to watch. For a deeper dive, download the full Utilities Observer.

Today, European electricity prices are well above those in China, the United States, and pre-energy-crisis levels. The gap is set to endure as network costs and levies increase. 

Even with generous subsidies, electrification remains economically challenging for both households and industry.

We forecast a 1.1% compound annual growth rate in electricity consumption over 2024-30 in the European Union. That’s below the 1.4% that we expect in the US, chiefly because of lower-data center growth.

EU electricity consumption will barely exceed its 2019 level, according to our forecast.

Even with generous subsidies, electrification remains economically challenging for both households and industry. We expect the European Union to miss its 2030 decarbonization goals as the electrification rate of the economy will only increase to 25% in 2030.

Accordingly, we forecast a 43% reduction in CO₂ emissions between 1990 and 2030. That’s well short of the 55% targeted by the European Commission.

Persistently high electricity prices for industrials strengthen the case for energy efficiency solutions providers like Atlas Copco ATCO A.

Companies could benefit from the quest for energy efficiency if they focus on solutions like:

• Upgrades to motor-driven systems, such as compressors, pumps, and fans, by using variable-frequency drives
• Better energy management systems
• Replacement of legacy-driven plants
• Heat-recovery integration, which captures and reuses waste heat directly or indirectly

We forecast EU chemical production to decline by 10% by 2030, largely due to capacity closures. This will benefit global players with a solid US footprint, like Dow Inc DOW.

The energy price jump has materially weakened European chemicals players, which have massively underperformed other EU industries since the energy crisis. A US tariff of 15% on chemicals from the EU is also a material headwind. In the first half of 2025, the US was, by far, the first country of chemicals exports for the EU.

As China builds out its petrochemicals supply, we expect a lot of the offsetting shutdowns will occur in the EU. Major players in the sector like Dow, Ineos, or Covestro are already shutting down commodity chemicals plants across Europe. We expect that will help move the commodity chemicals market back into balance by the end of 2026.

Nordic countries, France, and the Iberian Peninsula are well positioned to lure data centers in Europe. At the stock level, EDP and Schneider Electric could benefit

Given their high and stable power consumption, data centers represent a strategic opportunity for utilities to secure predictable, long-term revenues supported by high load factors. 

Power prices, grid saturation, and the share of renewables in the national energy mix are particularly critical to attracting data-center development. They influence both the operating cost base and the compliance of new projects with EU sustainability guidelines. 

Nordic countries and France look the most attractive to data centers, but most of utilities exposed to those countries aren’t listed.  Spain and Portugal offer a high share of carbon-free power and low power prices, but average five years of waiting in the connection queue. 

Although we expect green hydrogen deployment to fall short of EU targets, we still view Air Liquide SA AI as attractive.

Green hydrogen offers a promising solution to decarbonize industries with high-temperature heat processes, like the chemicals and steelmaking industries, which are normally considered hard to abate.

High electricity prices are the central constraint on green hydrogen competitiveness. We forecast 0.6 megatons of green hydrogen production by 2030, well below the EU’s 10 Mt target.

Despite the gloomy outlook for green hydrogen in Europe, hydrogen players are worth looking at. Air Liquide, Linde PLC LIN and Air Products and Chemicals Inc APD, have consistently delivered lucrative returns because of their economic moats.

Slower electrification of households means that the valuation discount of gas utilities like Centrica PLC CNA is overdone. Gas assets include liquid natural gas supply contracts, gas production, transport and transmission networks, and gas retail supply business.

High retail electricity prices in the largest countries will cause slower household decarbonization. That means the European Union and United Kingdom will fall well below the 2030 targets, despite the planned carbon cost for residential heating as of 2027.

We believe gas assets will continue to generate sustainable cash flows for longer than the market expects. Gas utilities offer higher dividend yields than the sector, but investors should monitor the price to avoid overvalued opportunities.

Before making investment selections, financial advisors should review the following with the help of the right investment research tools:

• Key financial metrics such as earnings growth, compound annual growth rate, and earnings per share
• Analyst ratings on competitive advantage like the Economic Moat Rating, historical performance, and forward-looking assessments
• Overall practice exposure to any over- or underperforming securities
• Portfolio allocation to European stocks and the utilities sector
• The impact of stock swaps on overall sector exposure and investment risk
• Investor preferences for sustainable investment approaches