Monthly electricity prices in selected EU countries 2020-2023

In 2021, wholesale electricity prices in the European Union (EU) soared. This was the result of a myriad of factors, including increased demand in the “post-pandemic” economic recovery, a rise in natural gas and coal prices, and a drop in renewable power generation due to low wind speeds. The spike in European electricity prices was one aspect of a global energy crisis which has seen energy prices grow around the globe. The trend was further aggravated by Russia's invasion of Ukraine in early 2022. Extreme heat driving up electricity demand during summer months, combined with uncertainties over future gas supply caused prices to spike again, with most countries experiencing record highs in August that year.

 Surging gas and coal prices driving electricity costs

As natural gas and coal are among the leading sources of electricity generation in the EU, accounting for roughly one-third of the output in 2021, electricity rates are highly dependent on the price of these commodities. Natural gas prices in Europe increased continuously throughout 2021, as reserves reached worrying low levels in the region and Russia, the main source of natural gas in Europe, kept exports low in order to replenish its own depleted stocks. Uncertainties over future Russian gas supply following the country's invasion of Ukraine was one of the main factors driving up gas prices in 2022.

Different rises for different countries

While the energy supply shortage hit Europe as a whole, the impact on each country’s electricity price varied. In January 2023, Italy recorded the second-highest figure in the region, having surpassed 174 euros per megawatt-hour. The country is the European Union’s leading electricity net importer. Meanwhile, Sweden – where hydropower and nuclear energy account for a large share of the country's electricity generation – saw a less pronounced growth in prices in the period.