A new study published by Europex and prepared by Frontier Economics provides compelling empirical evidence that EU electricity markets deliver efficient and resilient outcomes - both in normal times and under stress - while highlighting the need for further integration to unlock their full potential.
Against the background of the European energy crisis (2021–2023) and the ongoing reform debate, the report examines market functioning and its performance under varying conditions. The analysis is based on data from 39 bidding zones - areas in which electricity is traded at a uniform price - covering 26 European countries over the period 2018–2024.
Amid growing concerns over global energy supply disruptions linked to geopolitical tensions in the Middle East, the findings show that European electricity markets continue to function as intended. Wholesale price levels and volatility reflect underlying supply and demand fundamentals - including gas prices, weather conditions and system tightness - rather than structural shortcomings in market design. The report confirms that short-term wholesale markets play a central role in enabling efficient price discovery, supporting security of supply and minimising system costs. Market coupling and cross-border trade have further enhanced system efficiency and contributed to reducing price volatility across Europe
While volatility increased significantly during the energy crisis, this was largely driven by external shocks - most notably elevated and volatile gas prices, unfavourable weather conditions affecting renewables, hydro and nuclear generation, and insufficient cross-zonal transmission capacity.
The report further underlines that price volatility is an inherent and necessary feature of wellfunctioning electricity markets. It provides essential signals for operational decisions and for investment in flexibility, including storage, demand-side response and interconnection capacity.
Based on these findings, and in light of current geopolitical tensions, Europex calls on policymakers to prioritise measures that strengthen, rather than distort, market functioning.
In particular, the report recommends:
- Preserving marginal pricing and avoiding market-distorting interventions;
- Maintaining efficient coupled single day-ahead and intraday markets across the EU;
- Supporting liquid forward markets to enable effective hedging of price risks;
- Deepening European market integration and expanding cross-border trade; and
- Addressing affordability concerns through a holistic view of retail electricity prices, including network costs and taxes, rather than focusing solely on wholesale prices.
The report also highlights the importance of a coherent policy framework that accelerates investments in infrastructure, generation and flexibility, while maintaining efficient price signals across wholesale and retail markets.
As Europe advances its energy transition, well-functioning and integrated electricity markets will remain essential to delivering an affordable, secure and decarbonised energy system.
Read the full report here.
