Renewable electricity: best buffer against gas price volatility

The EU’s continued exposure to fossil fuel supply shocks

In a challenging geoeconomic context, the EU’s continuing high dependence on fossil fuel imports leaves it exposed to external supply shocks, with direct implications for competitiveness and strategic autonomy. With imports accounting for around 85% of all the gas and 97% of all the oil products consumed in the EU in 2024 (Eurostat, 2026a), the EU already carries a structurally high and volatile fossil fuel import bill. This has proven highly sensitive to external political and economic shocks: after peaking at 4% of EU GDP in 2022 following Russia’s weaponisation of gas deliveries, total EU spending on fossil fuel imports fell to 2% of GDP in 2024 (Eurostat, 2026b), although it is expected to rise again in 2026 amid the geopolitical tension in the Middle East.

The restriction of energy flows through the Strait of Hormuz, following the US-Israel attack on Iran in March 2026, has already disrupted international oil and gas markets. Even if diplomatic efforts begin to ease the tension, trade flows are likely to take weeks – if not months – to normalise, with the surge in fossil commodity prices unlikely to subside in the short term (IEA, 2026c). For the EU economy, the latest macroeconomic projections point to slower growth and rising inflationary pressures (ECB, 2026). Moreover, international gas price volatility is already weakening incentives for the usual seasonal pace of gas storage refills (JRC, 2026), potentially tightening supply ahead of winter and pushing up electricity and heating costs.

To reduce fossil fuel dependence and macroeconomic exposure to price volatility, Member States’ energy security strategies must combine near‑term acceleration of renewables and electrification with structural reforms to improve efficiency and demand response.

This briefing shows that renewable electricity sources already help cushion wholesale electricity markets against external fossil fuel price shocks and geopolitical disruption. The analysis combines data for the first 16 weeks of 2026 (quarter one plus three additional weeks) with quantitative analysis to assess how gas price volatility feeds into EU electricity prices and how the benefits of renewable electricity and electrification accumulate and strengthen over time. Annex I sets out the main modelling scenarios, approach and limitations. The following sections focus on the electricity market, explaining how gas price volatility is transmitted to wholesale prices and quantifying how renewables have already reduced this exposure at EU and national levels.

Gas-fired power plants — the key driver of high EU electricity prices

The 2026 war in the Middle East has renewed volatility in global fossil fuel markets, with higher gas prices feeding through to EU electricity prices, as explained in Box 1.

National differences in gas price setting

Figure 1 illustrates the ‘influence of gas’ (see also Box 2), the share of renewable generation and average wholesale electricity prices for a range of EU countries. It shows that gas plays a diminishing role in price formation as the share of renewables rises, while structural factors, including other low-carbon electricity supply, grids, interconnections, demand response and storage, also shape outcomes.

In 2026, Italy and Poland were among the EU countries most exposed to gas price volatility, with gas setting electricity prices in 66% and 63% of the analysed hours, respectively, driving persistently high wholesale electricity prices. In Spain, gas set the electricity price in only 9% of the hours, resulting in an average price of EUR 43/MWh during the period. The price gap between Italy and Spain is not only a function of geography or market design, but also the result of contrasting energy policy choices over the past two decades. Italy’s electricity production has stagnated since 2000 (down 2%), with the country increasingly reliant on imports of lower-priced renewable electricity from France and Switzerland (IEA, 2026a). During the assessed period in 2026, gas supplied 53% of domestic generation, compared with 40% from low-carbon sources (ENTSO-E, 2026). By contrast, Spain has transformed its power system to become a net electricity exporter, its generation increasing by 28% since 2000 thanks to rapid wind and solar growth; during the assessed period in 2026, low-carbon sources generated 79% of Spain’s electricity, and gas only 16% (ENTSO-E, 2026; IEA, 2026b).

Figure 1. Gas influence, renewables in the power mix and average electricity price, selected EU markets, January to mid-April 2026

These national differences reveal how renewable electricity directly reduces exposure to gas-driven price formation. The next section estimates this effect at EU level, combining 2026 observed data and two counterfactual scenarios.

What looked like climate policy a decade ago now functions as macroeconomic insurance

In wholesale electricity markets, gas volatility in early 2026 cost the EU an estimated EUR 13 billion; renewables delivered an estimated EUR 29 billion in savings

During the first 16 weeks of 2026, renewable electricity accounted for 44% of EU generation, nearly double its 2010 share (ENTSO-E, 2026; Eurostat, 2026c). Two illustrative scenarios show how gas prices feed into EU wholesale electricity prices, and how post-2010 renewable electricity expansion has reduced this exposure (see Annex I):

• Scenario 1 keeps gas prices at their level before the closure of the Strait of Hormuz (SC1).
• Scenario 2 uses observed fossil fuel prices, but rolls back the energy mix to 2010 levels, i.e. less renewables and more fossil fuel sources (SC2).

Continued gas dependence means European consumers are paying a considerable gas volatility premium. During the first 16 weeks of 2026, the EU average wholesale electricity price reached EUR 98/MWh, 13% above the stable gas price scenario (SC1). Under the stalled renewables scenario (SC2), it would have reached around EUR 144/MWh 67% higher.

The observed EU wholesale electricity bill reached EUR 78.8 billion for the first 16 weeks of 2026 (Figure 2), or 20% above the stable gas prices scenario (SC1), assuming the same level of demand EUR 65.8 billion with stable gas prices; SC1). With stalled renewables (SC2) it would have risen to EUR 107.7 billion, meaning 37% higher than observed (SC0) and 64% higher than with stable prices, for the same demand.

Accordingly, gas price volatility added roughly EUR 13 billion to the EU’s wholesale electricity bill, while post-2010 renewables deployment saved an estimated EUR 29 billion. The effect is cumulative: renewables are becoming a more effective shock absorber than short-term fiscal relief or gas price stabilisation measures alone.

Figure 2. Total wholesale cost of day-ahead electricity by scenario, January to mid-April 2026

Deployment of renewables could prevent a 125% rise in EU wholesale prices by 2030

Looking to 2030, these effects intensify as renewables scale up (Figure 3). Under SC1, the EU average wholesale electricity price would fall to EUR 71/MWh by 2030, reflecting the declining role of gas in marginal price-setting as renewables grow to 68% of total EU generation, according to projections from the EU Member States in the most recent, complete Ten-Year Network Development Plans (ENTSO-E, 2024; see also Annex I). By contrast, under SC2, average EU wholesale prices would surge, increasing by 125% to EUR 160/MWh, as reliance on gas generation is maintained.

The implications are clear: renewable capacity deployment is key for medium-term electricity prices to fall. In the transition to a cleaner, more secure and affordable energy system, the choice across the EU Member States regarding the pace and ambition of future renewable energy rollout is ultimately a political one.

Figure 3. Illustrative development of wholesale electricity prices to 2030 under the modelled scenarios

Figure 3 also shows that the effect of renewables compounds over time: as renewable deployment accelerates, gas is increasingly pushed out of marginal price-setting. As a result, renewables act as a structural shock absorber, buffering the system when geopolitical tensions rise and fossil fuel prices spike.

Renewables consistently deliver stronger price benefits than stable gas prices in most EU countries

While the EU picture is clear, national outcomes vary considerably depending on generation mixes, climatic conditions, demand profiles, interconnections and wider system characteristics.

At the national level, during the first 16 weeks of 2026, the share of renewable electricity supply was negatively correlated with average wholesale electricity prices in most EU countries (see Figure 4, left). As renewable generation increases, gas is more frequently displaced from the merit order, being less often ramped up to meet peak demand. This decreases its influence on wholesale electricity prices. For instance, hourly data for the Germany-Luxembourg (DELU) market in early 2026 illustrate this pattern (Figure 4, right): high renewables output coincides with low wholesale prices, while low renewable output is concentrated in high-price hours above EUR 100/MWh.

Figure 4. Correlation between the share of renewable generation in the mix and average electricity prices, January to mid-April 2026

In most of the analysed countries, renewable capacity deployment cuts wholesale electricity prices more than stable gas prices did in 2026. The renewables price benefit ranges from around EUR 5-10/MWh in Poland and Czechia to as much as EUR 70-95/MWh in Spain and Lithuania.

Countries with a higher share of renewable electricity already capture larger price reductions and are far better insulated against gas price volatility. By contrast, the gains from gas price stabilisation (SC1) are smaller and largely uniform, at EUR 1-22/MWh, underscoring that stable gas prices offer only short-term relief – not structural price protection.

Figure 5 traces this compounding effect across selected countries, from fossil-fuel-dependent high-cost systems to cleaner, lower-cost ones. Lithuania captures the contrast clearly: in 2026 its observed wholesale electricity price was EUR 116/MWh (SC0), with renewables at 73% of domestic generation, reflecting a rapidly expanding renewable generation base and imports covering over a quarter of total demand. Without this expansion, assuming renewables had stalled at 2010 levels (at 11% of the mix; SC2), prices would have reached EUR 211/MWh. Other notable shifts include Spain’s steep price decline and significant wind and solar expansion in Germany and Belgium since 2010.

Figure 5. Structural impact of renewable generation on national average wholesale electricity prices, January to mid-April 2026

Additional policy levers necessary to fully unlock lower electricity prices

Deployment of renewables is not the only factor to lower wholesale electricity prices. A multiple regression analysis using average gas price influence and the share of renewables explains around 30% of the variation in national wholesale prices across all EU countries in early 2026. This underlines their importance, but also shows that other factors too shape national outcomes, including access to cheaper imports through interconnections, other low carbon generation in the mix, as well as demand response and storage.

The examples of Lithuania, Spain and Germany show that while renewable capacity growth is essential, its price benefits also depend on wider system factors, notably the ability to integrate variable solar and wind output and reduce the need for gas-fired power during peaks of electricity demand or slumps in the output of renewables. This matters because nearly two-thirds of national energy security measures across the European Union still focus on energy supply (ETC CM, 2025), while system flexibility remains underdeveloped. As the share of renewable electricity rises, price benefits depend increasingly on grids, storage and demand response to integrate variable solar and wind supply. More rapid electrification of buildings, transport and industry must therefore be matched by parallel progress in renewables, grids, storage, efficiency and demand response to avoid locking in additional gas‑fired capacity. The message is clear: balanced progress across supply, demand, grids and storage — supported by pricing that favours electrification — is essential to deliver sustained price reductions.

1Identifiers2Annex I3References4Footnotes5Press release

EEA Briefing 18/2026:

Title: Renewable electricity: best buffer against gas price volatility

HTML: TH-01-26-036-EN-Q - ISBN: 978-92-9480-788-5 - ISSN: 2467-3196 - doi: 10.2800/6507239

This analysis is based on data for the first 16 weeks of 2026 and two counterfactual scenarios designed (i) to isolate the impact of gas on EU wholesale electricity prices, and (ii) to assess the impact of renewable energy deployment, as follows:

For 2026 (first 16 weeks):

• Observed scenario (SC0): Reflects historic developments and observed market conditions in early 2026 and serves as the reference case.
• Stable gas price scenario (SC1): Identical to the observed scenario, except for gas commodity prices that are assumed to stay at levels before the closure of the Strait of Hormuz (week 1 of 2026);
• 2010 stalled renewables development scenario (SC2): Identical to the observed scenario, except the electricity mix is set back to 2010 levels: lower renewables and higher fossil capacity.

Together, these scenarios allow electricity price outcomes in 2026 to be decomposed into cyclical effects (mainly driven by gas price fluctuations) and structural effects (linked to the evolution of the energy mix).

Extension to 2030:

The two counterfactual scenarios (SC1 and SC2) are also extended to 2030, the next big target year for the EU’s climate and energy ambitions, to explore how the European electricity system may evolve under diverging trajectories:

• Stable gas price scenario (SC1): For assumptions on capacity developments to 2030, this uses national trends and benchmarks from the most recent, complete Ten-Year Network Development Plans (TYNDP) of 2024, and for fuel prices it uses European Commission guidance.
• 2010 stalled renewables development scenario (SC2): Applies the same fossil fuel capacity and price assumptions as SC1, but keeps renewable capacity fixed at 2010 levels.

This forward-looking exercise highlights how price dynamics may evolve depending on the pace of renewables deployment, SC2 being used to illustrate a hypothetical ‘worst-case’ that has already been averted thanks to consistent national and EU climate mitigation and energy transformation efforts.

Key limitations and assumptions

Several caveats should be considered when interpreting the results:

• Coverage: Ireland is excluded due to limitations in primary data availability for early-2026 from the ENTSO-E platform.
• Wholesale focus: Results relate to wholesale prices and do not fully reflect retail prices faced by household and non-household consumers in the EU, which include network costs, energy taxes and levies and other charges, and which can vary widely across the Member States (see Eurostat, 2026d).
• Demand assumptions: Although higher prices (especially under SC2) would be likely to reduce consumption in practice, demand is not differentiated across scenarios, following the observed levels for historic years and TYNDP assumptions for 2030.
• Market assumptions: The model assumes perfect competition in all scenarios.
• Forward-looking uncertainty: Results for 2030 depend on assumptions including regarding technology deployment, fuel prices and system evolution.
• Conservatism of SC2: The stalled renewables scenario is likely to underestimate the true costs of lower renewable deployment, as it does not fully capture wider impacts on prices, costs and emissions.

EC, 2026, ‘Electricity market design’
(https://energy.ec.europa.eu/topics/markets-and-consumers/electricity-market-design_en), accessed 18 June 2026.

ECB, 2026, Eurosystem staff macroeconomic projections for the euro area, European Central Bank, Frankfurt am Main, Germany.

ENTSO-E, 2026, Transparency Platform (https://transparency.entsoe.eu), accessed 19 June 2026.

ENTSO-E, 2024, TYNDP 2024: Europe’s electricity infrastructure plan. Paving the way towards a more efficient European power system (https://www.entsoe.eu/outlooks/tyndp/2024/), accessed 8 June 2026.

ETC CM, 2025, Overview of Reported Integrated National Climate and Energy Policies and Measures in Europe in 2025, ETC CM Report 2025/04, European Topic Centre on Climate change mitigation (https://www.eionet.europa.eu/etcs/etc-cm/products/etc-cm-report-2025-04), accessed 19 June 2026.

Eurostat, 2026a, Energy imports dependency; (https://ec.europa.eu/eurostat/databrowser/view/NRG_IND_ID__custom_21887336/default/table), accessed 19 June 2026.

Eurostat, 2026b, EU imports of energy products decreased again in 2025 (https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20260325-3), accessed 20 June 2026.

Eurostat, 2026c, Short assessment of renewable energy sources (SHARES) (https://ec.europa.eu/eurostat/web/energy/database/additional-data#Short%20assessment%20of%20renewable%20energy%20sources%20(SHARES)), accessed 19 June 2026.

Eurostat, 2026d, Electricity price statistics (https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Electricity_price_statistics#Context), accessed 23 June 2026.

IEA, 2026a, Sources of electricity generation by country (https://www.iea.org/countries/italy/electricity), accessed 18 June 2026.

IEA, 2026b, Source of electricity generation by country (https://www.iea.org/countries/spain/electricity), accessed 26 June 2026.

IEA, 2026c, The Middle East and Global Energy Markets (https://www.iea.org/topics/the-middle-east-and-global-energy-markets), accessed 18 June 2026.

JRC, 2026, 2026, Interactive gas monitoring dashboard to boost EU energy security (https://app.powerbi.com/view?r=eyJrIjoiNjYxN2JmYTctYmEzYy00NGE3LTk4ZGQtMWI5YzU3OWIxNDQ2IiwidCI6ImIyNGM4YjA2LTUyMmMtNDZmZS05MDgwLTcwOTI2ZjhkZGRiMSIsImMiOjh9), accessed 23 June 2026.

1. The EU spent EUR 335 billion on fossil fuel imports in 2025, considerably less than the EUR 654 billion paid in 2022 (4% of EU GDP), which can be attributed to Russia’s war of aggression against Ukraine (Eurostat, 2026b).
   ^↵
2. During the assessed period in 2026, average wholesale electricity prices were EUR 127/MWh in Italy and EUR 115/MWh in Poland (Figure 1).
   ^↵
3. The correlation coefficient is strong for the assessed sample, the regression method finding that 59% of the hour-to-hour variation in wholesale electricity prices is explained by the share of renewables in the generation mix (r=—0.77; R² = 0.59). Negative prices indicate congestion costs, calling for greater interconnectivity and flexibility to avoid curtailment. Other cofounding factors, such as the ability to utilise cross-border imports, draw on storage or benefit from flexible demand response, have not been investigated.
   ^↵
4. The fitted model explains a wholesale price variance of R² = 36.4%, whereas the adjusted coefficient of determination (adjusted R²) provides a more conservative price variance of 30.3%. The variance inflation factor showed no material collinearity for gas price setting and share of renewables for the assessed sample (VIF ≈ 1.00).
   ^↵
5. High electricity prices can result in systems with a low share of renewables, when more expensive technologies such as gas plants clear the merit order. They can also result in systems with a high share of variable solar and wind when insufficient flexibility from low-carbon resources (e.g. grids, storage and demand response) require the activation of gas peaker plants to balance the system.
   ^↵
6. These measures are explored in greater detail in the EEA report Renewables, electrification and flexibility – For a competitive EU energy system transformation by 2030. https://www.eea.europa.eu/en/analysis/publications/renewables-electrification-and-flexibility-for-a-competitive-eu-energy-system
   ^↵

Renewables lower energy prices and play key role to reduce vulnerability to fossil fuel supply shocks

Boosting the use of homegrown renewable electricity is Europe’s best way to reduce its vulnerability to volatile international energy supplies and rising energy prices according to a European Environment Agency (EEA) assessment published today.