Goldman Sachs sees European electrification as a new investment cycle

Goldman Sachs believes that renewed energy tensions, linked to the war in Iran and disruptions to oil and gas flows through the Strait of Hormuz, could accelerate Europe's shift toward electricity.

According to the U.S. investment bank, European electricity demand is expected to grow by 1.5% to 2% annually in 2026 and 2027, before accelerating to 2% to 4% per year by the end of the decade. In an 'hyper-electrification' scenario, driven notably by the requirements of artificial intelligence data centers, growth could reach 5% per year starting in 2030.

This outlook is based on a structural constraint that extends far beyond climate issues alone, as electricity still accounts for only about 20% of European energy consumption, compared to 80% for fossil fuels. For Goldman Sachs, the strengthening of energy security, decarbonization, and rising industrial needs should support a 'super-cycle' for utilities, provided that investments in grids, interconnections, and production capacities keep pace with demand.

Europe faces the cost of its energy dependence

The trade balance issue adds a further dimension to this scenario, as the EU remains heavily dependent on energy imports. According to Eurostat, extra-EU imports of energy products reached 336.7 billion euros in 2025, including 218.8 billion euros of crude oil, 56.4 billion euros of liquefied natural gas, and 60.1 billion euros of pipeline gas.

Research from ENTSO-E, the European association of electricity transmission system operators, reinforces this thesis. In its 'Ten-Year Network Development Plan 2024', the organization identifies 108 GW of additional economically viable cross-border capacity by 2040, followed by 224 GW of cross-border capacity and 540 GW of storage by 2050.

ENTSO-E further estimates that Europe will need to build more than 100,000 kilometers of new onshore and offshore lines, citing over 800 billion euros in necessary investment by 2050 for cross-border, hybrid, and offshore grids. This makes high-voltage cables, interconnections, and regulated assets obvious bottlenecks.

Cables, grids, utilities: the potential winners of electrification

Industrial companies appear best positioned to capture a portion of these investments, as bottlenecks primarily concern the physical equipment required for electrification. France's Nexans emerges as the most direct play on this theme, with a deliberate strategic pivot toward electrification and solid 2025 results, marked by 6.1 billion euros in standard sales, 8.3% organic growth, a 27.3% increase in adjusted EBITDA, and nearly doubled free cash flow. The group thus offers direct exposure to cables, grids, and transmission without being directly dependent on wholesale electricity prices.

Among other European cable manufacturers, Denmark's NKT offers a more aggressive version of the same scenario, with high sensitivity to high-voltage orders, interconnections, and offshore projects. Its high-voltage order backlog reached 10.2 billion euros at the end of 2025, with over 3.5 billion euros in order commitments. Italy's Prysmian, however, remains the pillar of the segment, with superior critical mass, 19.65 billion euros in 2025 revenue, and 8.4% organic growth in transmission during the fourth quarter.
Schneider Electric, ABB, Legrand, and Siemens Energy are also benefiting from electrification, particularly through data centers and electrical equipment, though their profiles are less pure plays.