The EU energy price crisis – is the market design to blame?

May 3, 2022

 

Since the end of 2021, we have witnessed unprecedented price levels in the European electricity markets, with an increase in electricity prices by 200% within less than a year. This tense market situation was further perpetuated by geopolitical events, namely the Russian invasion of Ukraine, impacting gas flows to Europe. Energy prices, especially retail prices, are an extremely sensitive political issue. High energy prices affect countries differently, leading to disagreements between EU Member States on how to respond to the price crisis.

While the EU Commission, along with some Member States, defend the EU Internal Energy Market, others blame the power market design. Recently, market interventions such as electricity price caps have been discussed as a potential way out of the energy price crisis. But is the power market design really to blame?