A season of high electricity prices in Europe

The fall and winter 2022 have been remarkable in terms of electricity prices in Europe. In an area with 450 million inhabitants and an annual electricity consumption of 2,000 TWh, wholesale electricity prices during late 2021 and early 2022 were, on average, 3 to 5 times higher than they had ever been in the past. For many Europeans, including retail customers facing sudden rate increases by the end of the year, this period of high prices came as a surprise. However, the conditions for this development had been slowly building up over the previous six to twelve months.

This article highlights the singular nature of these events and discusses the main causes of these developments. The analysis is limited to the period until January 31st, 2022, i.e. without considering further price shocks caused by the Russian intervention in Ukraine in February 2022.