The energy landscape of Europe has undergone significant changes since Russia's invasion three years ago. This upheaval has not only reshaped energy prices but also highlighted the resilience and adaptability of the European Union in managing an unprecedented crisis. As of recent data, Budapest and Bucharest have witnessed a decrease in gas prices by 26% and 9%, respectively, compared to October 2021. Meanwhile, electricity prices in EU capitals have surged by an average of 29.5% since the pre-invasion period, with Paris experiencing a 30% increase and Berlin a more moderate 19% rise.
Professor Jan Osicka commends the EU's management of the energy crisis, acknowledging the effectiveness of its solidarity mechanism and the robustness of its internal market. He states:
"The solidarity mechanism has worked, the internal market has remained functional and its design hasn't been tampered with too much."
In contrast, Amsterdam recorded the steepest increase in electricity prices, escalating by 89% over a four-year period. The suspension of production at the Groningen gas field, owing to earthquake risks, significantly contributed to rising gas prices in the Netherlands. This highlights the volatility faced by fossil fuel-dependent markets.
"Fossil fuel-dependent markets like the Netherlands faced higher volatility, highlighting the role of energy diversification and regulatory frameworks in price stability," – Ivana Rogulj, Wolfgang Eichhammer, Stavros Spyridakos, and Vlasios Oikonomou.
Natural gas remains a critical component of Italy's electricity mix, accounting for 45%, while renewables contribute no more than 30%. This dependency underscores the challenges faced by countries heavily reliant on fossil fuels. Nevertheless, Western and Northern Europe experienced the sharpest electricity price hikes, driven by various factors including geopolitical tensions and supply disruptions.
Despite these challenges, when comparing January 2022 to January 2025, household electricity prices across EU capitals increased by only 3.4% on average, including taxes. Paris maintained the most stable prices over this period. However, households in EU capitals paid 36% more for electricity in January 2025 compared to January 2021.
Warsaw saw the most dramatic increase in gas prices at 109%, followed by Lisbon with a 77% increase and Berlin with a 72% rise relative to October 2021. These statistics reflect the broader impact of geopolitical events on energy markets and underscore the importance of strategic energy policy and diversification.
The benefits of renewable energy production are evident in Nordic countries, which have reduced their exposure to fossil fuel price volatility through hydropower, geothermal, and wind energy.
"Nordic countries benefit from renewable electricity production from hydropower, geothermal, and wind, reducing exposure to fossil fuel price volatility." – Rogulj, Eichhammer, and Spyridakos.
Spain stands out for its significant wind, solar, and hydro capacity, which has limited its reliance on fossil fuels and shielded it from external price shocks. The country's regulated electricity tariff (PVPC) played a crucial role in stabilizing prices.
"Spain's significant wind, solar, and hydro capacity reduced reliance on fossil fuels, limiting exposure to external price shocks." – Rogulj, Eichhammer and Spyridakos.
"Spain's regulated electricity tariff (PVPC) balanced price volatility by linking retail electricity prices to longer-term wholesale market averages, protecting consumers from extreme short-term fluctuations," – Rogulj, Eichhammer and Spyridakos.
Oslo recorded a notable decline in electricity prices by 10%, reflecting a trend in non-EU capitals where renewable energy integration has mitigated price increases. Conversely, LNG imports have proven costly due to additional expenses associated with compression, transportation, and decompression.
"However, LNG imports tend to be more expensive than pipeline gas due to the additional costs of compression, transportation, and decompression," – Dr. Cyril Stephanos.
Dr. Cyril Stephanos also highlighted the dependency of Germany and Austria on natural gas imports from Russia.
"Both Germany and Austria have been highly dependent on natural gas imports from Russia," – Dr. Cyril Stephanos.
Leave a Reply