The politics of electricity pricing during Europe’s energy crisis

Abstract This paper analyses the European energy crisis of 2021–2023 and the European Commission’s response to calls for fundamental reform of the internal electricity market (IEM). The crisis triggered political controversy over the marginal pricing mechanism which links gas and electricity prices and resulted in calls for a fundamental redesign of the market. The paper examines the Commission’s efforts to resist radical reform and prevent the fragmentation of the IEM into national market silos. While the Commission succeeded in preserving the core architecture of the IEM, electricity policy has increasingly shifted toward the national level, with greater emphasis on energy security and industrial strategy. As a result, although cross-border market integration remains largely intact, the IEM may evolve into a more hybrid configuration, combining market coordination with expanded use of long-term contracts and state-led investment. The paper reflects on the implications of this shift for the Commission’s role in electricity market governance during a period of crisis and transition.