Series “The Overlooked Energy Transition: Electrification of the Heating Sector” #1 From Energy Crisis to ElectrificationFour Pillars of EU Policy

in Japanese

Against the backdrop of recent energy price volatility and supply insecurity, electrification is increasingly in the focus of international energy policy. Ahead of COP31, Türkiye, as the presidency, has announced the “35% by 2035” electrification target, which aims to raise the share of electricity in global final energy demand from around 20% today to 35% by 2035.¹ This signals the need to shift final demand sectors that have traditionally depended on fossil fuels, such as buildings, transport, and industry, toward the use of electricity centered on renewable energy.

Heating, cooling, and hot water in the building sector are particularly important. In the EU, heating and cooling has become a strategic policy area where energy demand, energy security, energy costs, and climate policy intersect.

This column provides an overview of how building electrification has come to be positioned at the core of EU energy policy through the EU’s legal and regulatory framework. It focuses on four interrelated policy pillars: energy efficiency, decarbonization, energy security, and energy system integration. By tracing this policy shift, the column shows how Europe is moving from dependence on gas and oil toward the electrification of heat, and how this experience offers important insights for energy policy discussions in Japan.

Figure 1: Four main policy pillars supporting EU heating sector electrification

For Japanese readers, there is an important starting point to keep in mind. In many parts of Europe, space heating and hot water have historically been supplied by gas or oil boilers installed inside buildings, with heat distributed to individual rooms through water-based heating systems. For this reason, replacing fossil-fuel boilers with electric heat pumps does not necessarily mean changing the basic way households use heat. In many cases, the same demand for space heating and hot water can continue to be met through familiar systems, while the heat source is shifted from fossil-fuel combustion to a more efficient electricity-based technology.

Japan’s situation is different. Domestic hot water still relies heavily on gas boilers, but space heating is often decentralized and, in many homes, already partly electrified through individual room air conditioners. The situation is different again in commercial buildings, where heating, cooling, and hot water systems are more diverse. European policy debates therefore cannot simply be applied to Japan as they are. However, the EU experience is still highly relevant because it shows how governments can treat heating, cooling, and hot water supply as a strategic energy-policy field: electrifying remaining fossil-fuel use also leads to cost reduction, energy security and system efficiency.

1. Heat electrification as a strategic policy area

The energy demand of the building sector is of high importance for EU policies. Buildings account for around 40% of final energy consumption in the EU, and roughly half of EU gas consumption takes place in buildings. For households, heating, cooling, and hot water dominate energy use: in 2023, space and water heating alone accounted for 77.6% of final household energy consumption.

At the same time, the building stock remains old and inefficient. Around 75% of buildings in the EU are considered energy inefficient, while the renovation rate remains at only around 1% per year.

Figure 2: Importance of heating and cooling in the EU building sector

The heating sector remains harder to decarbonize than electricity. Although renewables are expanding, they accounted for only 26.7% of energy use in the EU heating and cooling sector as a whole in 2024.^4,5 Europe cannot meet its climate and energy goals without changing how buildings use heat. This is why the EU has gradually broadened its approach concerning the heating and cooling sector: from building efficiency and renewable heat toward a wider strategy for decarbonization, energy security, and system integration.

This policy evolution is summarized in Figure 3.

Figure 3: Timeline of EU policies related to the heating and cooling sector

Policy for the building sector in the EU initially developed as a form of energy efficiency policy, centered on improving building performance and reducing energy demand. Through the Energy Performance of Buildings Directive⁶ (EPBD) and the Energy Efficiency Directive⁷(EED), emphasis was placed on insulation performance, equipment efficiency, renovation, and reducing heat demand. Under the Renewable Energy Directive⁸(RED), heating, cooling, and hot water came to be treated as one of the main energy-use sectors, alongside electricity and transport. Against the backdrop of the 2015 Paris Agreement and the EU’s climate neutrality target, the building sector also became an important focus of decarbonization policy.

Since the EU’s first Heating and Cooling Strategy⁹ in 2016, the EU has strengthened a more integrated policy approach, bringing together measures such as renewable heat, waste heat use, electrification, and district heating. This marked a clearer shift toward treating the sector as part of a broader, flexible energy system centered on renewable energy.

What further accelerated the EU’s policy shift was its structural dependence on fossil fuel imports and its exposure to price volatility. The EU depends on imports from outside the region for a large share of its energy demand, and its energy import dependency had reached around 57% in 2004.¹⁰ In 2009, gas supplies from Russia to Europe via Ukraine were disrupted for around two weeks, with many countries, especially in Central and Eastern Europe, severely affected. Since then, the deployment of renewable energy has expanded significantly, but the EU’s energy import dependency remained around 57% in 2024. This shows that expanding renewable electricity alone is not enough to sufficiently reduce dependence on imported fossil fuels that remain in final demand sectors such as transport, heating, and industry.

Russia’s invasion of Ukraine in 2022, and the instability in fossil fuel markets caused by heightened tensions in the Middle East in 2026, once again highlighted this risk. For this reason, reducing the remaining use of gas and oil in the building sector and shifting toward electrification using renewable electricity generated within the EU has become an important policy priority, not only from the perspective of climate policy, but also for energy security and the stabilization of energy costs.

Against this backdrop, the European Commission is expected to publish an Electrification Action Plan¹¹ and a new Heating and Cooling Strategy⁴ in 2026. Policy responses that bring together electrification, the heating sector, the power grid, and investment are therefore likely to be further strengthened.

2. The 4 pillars of the current EU electrification policy

The EU’s approach to building electrification can be understood through four mutually reinforcing pillars: energy efficiency, decarbonization, energy security, and energy system integration. This section uses these pillars to review recent policy developments and targets shaping the electrification of buildings.

2.1 Energy efficiency: reducing energy demand and cost

The first pillar is energy efficiency, which is a way to reduce bills, but also as a core principle for lowering energy demand, strengthening energy security, and reducing the scale of investment needed for decarbonization. The revised Energy Efficiency Directive of 2023 strengthens the “energy efficiency first” principle and sets a binding target to reduce EU final energy consumption by 11.7% by 2030 compared with the 2020 reference scenario.

Table 1: Key elements of the 2023 revised Energy Efficiency Directive EED¹²

Heat pumps play a major role in achieving those energy efficiency targets. Instead of producing heat by burning fuel, they move heat from ambient air, the ground, water, or waste heat into buildings. As a result, they can deliver several units of useful heat for each unit of electricity consumed. The scale of this effect is significant and the EU commission describes heat pumps as a “mature technology that is around 3-5 times more energy efficient than gas boilers”.¹³ To speed up installment rates of heat pumps, the commission has launched a Heat Pump Accelerator Platform¹⁴ in January 2025. A study¹⁵ estimates that replacing 30 million oil and gas boilers by 2030 (broadly corresponding to the scale of deployment envisaged under REPowerEU) would result in a 36% reduction of the gas and oil consumption in buildings and a 28% reduction of their CO2 emissions. It also finds that, in a large majority of cases, switching from a fossil-fuel boiler to a heat pump would lower heating bills, particularly in the long term.

2.2 Decarbonization: from fossil boilers to Zero-Emission Buildings

The second pillar is decarbonization. The EU’s building sector must align with the path toward climate neutrality.

The revised Energy Performance of Buildings Directive is central to this shift. It establishes “Zero-Emission Buildings (ZEB)” as the new standard for new buildings. This standard will apply from 1 January 2028 for new buildings owned by public bodies, and from 1 January 2030 for all new buildings. The Commission defines this as part of the pathway toward a building stock that no longer relies on on-site fossil-fuel emissions. The revised Directive also requires Member States to phase out financial incentives for new stand-alone fossil-fuel boilers from 2025. This sends a clear signal that fossil-fuel heating is no longer the long-term standard.

Table 2: Key elements of the 2024 revised Energy Performance of Buildings Directive EPBD¹⁶

The Renewable Energy Directive reinforces this direction from the supply side. The 2023 revised directive raises the EU’s binding renewable energy target to at least 42.5% by 2030, with an aspiration to reach 45%. For building heating and cooling, and district heating and cooling, the directive strengthens the role of renewable heat, including ambient and geothermal energy used through heat pumps.

Table 3: Key elements of the 2023 revised Renewable Energy Directive (REDIII) relevant to buildings¹⁷

2.3 Energy security: reducing exposure to imported fossil fuels

The third and increasingly important pillar is energy security. This is particularly relevant because the EU’s building sector is a major source of fossil fuel demand. Buildings account for around 40% of final energy consumption in the EU, and around half of the EU’s gas consumption is used in buildings. In the household sector, around 80% of final energy consumption is related to heating, cooling, and hot water. These figures show why the electrification of building heat is not only a climate issue. It is also a way to reduce exposure to imported fossil fuels and volatile prices by shifting a large share of household energy demand toward increasingly renewable, home-grown electricity.

The cost of this exposure to imports becomes visible whenever fossil-fuel markets are disrupted. For example, during the first 52 days of the Middle East crisis that began in March 2026, the European Commission estimated that the EU spent an additional EUR 24 billion on fossil fuel imports. At pre-crisis prices, spending over the same period would have been around EUR 51 billion; in reality, the EU paid around EUR 75 billion, or about 1.47 times as much.¹⁸

In response to international price shocks, the EU announced two strategies in recent years: REPowerEU¹⁹ in 2022 and AccelerateEU²⁰ in 2026.

In 2022, the European Commission presented REPowerEU as a plan to reduce dependence on Russian fossil fuels. Its main pillars are energy savings, the production of clean energy, and the diversification of energy supplies. In the heating sector, this has translated into policies focused on replacing gas and oil boilers with heat pumps and accelerating the deployment of renewable heat. REPowerEU aims to double the rate of heat pump deployment and to add 10 million heat pumps by 2027. It also calls for accelerating the deployment of large-scale heat pumps in district heating and cooling networks.

In April 2026, the European Commission presented AccelerateEU in response to instability in fossil fuel markets and rising energy costs caused by heightened tensions in the Middle East. This strategy also links energy cost reduction, energy security, clean energy investment, and electrification. AccelerateEU sets out five areas of action: closer coordination within the EU, protection for consumers and businesses, expansion of domestically produced energy, strengthening of the energy system, and increased investment in the energy transition.

For the electrification of buildings, two points are particularly important. The first is to strengthen the electricity supply that supports electrification technologies such as heat pumps by expanding domestically produced renewable energy. The second is to remove barriers to electrification across sectors, including buildings, such as electricity prices, grid connections, and infrastructure development.

The European Commission is also expected to publish an Electrification Action Plan in July 2026, as well as a renewed Heating and Cooling Strategy.

2.4 Energy system integration: buildings as part of a renewable electricity system

The fourth pillar is energy system integration. The European Commission’s Energy System Integration Strategy²¹ identifies direct electrification* as a key route for decarbonizing end-use sectors. It explicitly points to heat pumps, electric vehicles, and industrial electrification as examples.

*“Direct electrification” refers to replacing fossil-fuel combustion with technologies that use electricity directly, such as heat pumps, electric vehicles, and electric furnaces. By contrast, “indirect electrification” refers to the use of electricity after converting it into another energy carrier, such as hydrogen or synthetic fuels.

In the building sector, electrification does not simply mean replacing fossil fuel use. Heat pumps can also be understood as a way of linking buildings’ heat demand with the electricity system. When combined with thermal storage, smart controls, dynamic pricing, and demand response, they can shift electricity consumption away from peak hours and make better use of renewable electricity. The Heat Pump Accelerator Platform’s cost-reduction paper²² emphasizes that better integration of heat pumps into flexible and interoperable systems can reduce both consumer and overall system costs.

This wider system-integration role is becoming more important as renewable electricity expands. In 2024, renewables accounted for 47.5% of gross electricity consumption in the EU, while electricity still represented only 23% of final energy consumption.¹¹ The European Commission has introduced a reference indicator of 32% electricity in final energy consumption by 2030, and the Electrification Action Plan, scheduled for publication in July, is expected to accelerate cost-effective and energy-system-friendly electrification in buildings, transport, and industry.

Figure 4: Heat pumps as part of an integrated energy system

Cooling also gains more attention than before. Historically, EU heating and cooling policy was driven mainly by winter heating demand, fossil-gas use, and the need to replace boilers. However, as summer temperatures rise and heatwaves become more frequent, the importance of clean and efficient cooling is growing, especially in urban areas. This is also becoming a new energy security challenge. Cooling helps protect citizens, workers, and businesses during periods of increasing heat stress. At the same time, the spread of inefficient air-conditioning equipment could push up summer electricity peaks and place additional strain on the power system. Green cooling policy therefore has two meanings. The first is to strengthen resilience to heatwaves. The second is to avoid lock-in to inefficient cooling technologies that would increase peak demand and system costs.

3.  Advancing electrification in response to the energy crisis

A perspective that has become increasingly important in the EU’s approach in recent years is industrial competitiveness. Heat pump deployment is a measure to reduce fossil fuel use in the building sector, but also a part of a clean-tech industrial strategy. The Net-Zero Industry Act²⁴ aims to expand manufacturing capacity within the EU for strategic net-zero technologies, with a benchmark of securing EU manufacturing capacity that approaches or reaches at least 40% of annual deployment needs by 2030. Heat pumps are included among these key net-zero technologies.

Behind this lies the view that energy security and industrial policy should not be treated separately. Expanding the deployment of heat pumps reduces the remaining use of gas and oil in the building sector, while also strengthening and promoting Europe’s manufacturing base, supply chains, installation workforce, and technological innovation. To achieve this, it is necessary to create a steadily growing market and an environment in which companies can more easily invest in manufacturing capacity and skills development. Recent initiatives such as the Heat Pump Accelerator Platform can be understood as efforts to address practical barriers to deployment, such as upfront costs, electricity prices, installation capacity, permitting, and consumer confidence, and to connect the wider uptake of net-zero technologies with the strengthening of the industrial base.

This point is also important for Japan. In 2024, Japan’s energy self-sufficiency rate reached its highest level since the Great East Japan Earthquake 2011, but still remained at only 16.4%.²⁵ Reducing dependence on imported fossil fuels therefore remains a central energy security challenge. At the same time, Japan already has a strong industrial base in heat pumps, air conditioning, compressors, and electronics. Yet compared with power generation and transport electrification, the heating sector has received limited policy attention. Strengthening the domestic market for building electrification could therefore serve two purposes at once: reducing fossil fuel dependence and emissions, while also making use of Japan’s industrial strengths. It could support product innovation and help Japanese companies strengthen their position in growing international markets.

An important lesson from the EU experience is not only that the energy crisis became a trigger for accelerating electrification policy, but also that heat, electricity, buildings, and industrial policy need to be considered together across policy boundaries. Advancing the electrification of heat requires more than replacing boilers with heat pumps. It calls for policy design that connects the expansion of renewable-based electricity, building energy efficiency, power-system flexibility, consumer protection, and industrial competitiveness. This cross-sectoral perspective will also be important for Japan as it seeks to advance decarbonization of the heating sector and energy security at the same time.