In recent years, Europe has been grappling with a series of energy price shocks, with the latest being the closure of the Strait of Hormuz due to ongoing conflict in the Middle East. This marks the third energy crisis in four years, following the 2022 Russian gas pipeline crisis and the 2023–24 disruption in the Red Sea shipping lanes.
These geopolitical tensions have pushed oil prices past $100 per barrel, a peak not seen since the Russian invasion of Ukraine. Meanwhile, European gas prices have skyrocketed by approximately 70%, and stock markets are experiencing significant declines. The recurring issue is that Europe’s energy supply is heavily reliant on external sources transported through international waters, leaving it vulnerable to global disruptions.
Renewable energy sources like wind and solar offer a promising alternative, as they are immune to international embargoes or blockades. Every terawatt-hour generated domestically from renewable sources reduces dependency on foreign energy, which can be weaponized. Unlike the United States with its shale gas or China with its domestic coal, Europe must rely on renewable electricity to meet its energy needs at scale. Transitioning to renewable energy is not just a matter of immediate security but also foundational for the next industrial era.
The AI Race Is an Energy Race
The International Energy Agency (IEA) predicts that by 2030, global electricity consumption by data centers will exceed 945 terawatt-hours, surpassing Japan’s current consumption. The region that can provide the most affordable and abundant energy will lead the next industrial revolution, not just the one with the best engineers.
Europe faces a significant challenge, as its industrial electricity costs are about twice those in the U.S. and 50% higher than in China. This cost discrepancy is widening. While European innovators excel, they cannot overcome the substantial overhead of high energy costs. Both China and the U.S. recognize the strategic importance of energy abundance, with China investing over $1 trillion in clean energy in 2025 and the U.S. benefiting from cheap shale gas and substantial investments from major tech companies. According to former ECB President Mario Draghi’s competitiveness report, Europe’s industrial sector is suffering due to high energy expenses. To nurture future €100 billion enterprises, Europe must address its energy cost issues.
Renewables Won the Market. Now Let Them Build.
Fortunately, the cost of renewable energy has fallen by more than 90% over the last decade. By 2025, over 90% of new renewable capacity was more economical than fossil fuel alternatives. Renewables now represent the cheapest and quickest form of new energy generation.
In 2025, wind and solar generated more electricity in the EU than fossil fuels. However, the European Union’s dependence on gas remains a vulnerability, as demonstrated by a recent dip in wind and hydro output, which increased the EU’s fossil gas import bill by 16%. As China positions itself as a leading “electro-state” with inexpensive domestic electricity, Europe has the advantage of dense grid interconnections and a unified market to implement renewable energy at a continental level. The EU’s Clean Industrial Deal, launched in February 2025, aims to integrate renewables into the industrial strategy. While the vision is clear, implementation lags.
The Permits Problem Is a Security Problem
Despite the EU’s strategic direction, member states are hindering progress. In November, Sweden rejected 13 offshore wind projects in the Baltic Sea, which had a combined capacity of nearly 32 gigawatts, resulting in a loss of €47 billion in private investment.
Many European legislators remain influenced by traditional energy companies needing policy support, instead of backing self-sufficient renewable technologies. Energy permits should be treated with the same urgency as defense procurement, as protracted permitting processes are a strategic liability.
To compete effectively, European industries require ample power, affordable electricity, and the infrastructure to support large-scale enterprises. The necessary capital and technology are available; the missing element is the political will to facilitate development.
Original Story at fortune.com