European Union (EU) wholesale electricity prices have fallen in 2023 and 2024 after rising sharply over the past two years. The surge in European electricity prices is one aspect of the global energy crisis and is the result of a variety of factors, including increased demand in the “post-pandemic” economic recovery, rising natural gas and coal prices, and reduced renewable energy generation due to lower wind speeds and drought.
Higher gas and coal prices push up electricity prices
Natural gas and coal are among the main sources of electricity generation in the EU, accounting for more than a third of total electricity generation in 2022, so electricity prices are highly dependent on the prices of these commodities. Natural gas prices in Europe have risen continuously throughout 2021 and the first half of 2022 as reserves in the region have reached worryingly low levels. Uncertainty regarding Russian gas supplies following Russia’s invasion of Ukraine was one of the main factors driving the increase in gas prices in 2022.
Trends vary by country
The energy supply shortage affected the whole of Europe, but the impact on electricity prices in different countries varied. Throughout the period, Italy recorded the highest figures in the region, exceeding €540 per megawatt-hour in August 2022. Italy is the largest net importer of electricity in the EU. On the other hand, in Sweden, where hydroelectricity and nuclear power make up the majority of the country’s electricity generation, the price increase during this period was less pronounced.
