The European electricity market – putting it in context
Background: Under the merit-order principle, the most expensive plant still needed sets the power price.
Under the merit-order principle, the most expensive plant still needed sets the power price.
The debate around “The European electricity market” is not new, but it has grown more urgent since 2022. The energy price shock, the turn in interest rates and geopolitical tensions have called many old certainties into question.
Economists and industry bodies assess the situation in different ways. Most agree, however, that reliable conditions for investment decisions are crucial.
Several forces are at work in “The European electricity market”: the interest rate environment, domestic and foreign demand, regulation and, not least, market participants' expectations. None of these can be viewed in isolation.
Risks include unexpected political decisions, supply chain disruptions and abrupt shifts in financial market sentiment. Opportunities arise where companies respond early to changing conditions.