The Rise of Renewables in Europe
As Europe grapples with an energy crisis driven by volatile fossil fuel markets, the importance of renewable energy investments has become increasingly evident. These investments have played a crucial role in protecting consumers and businesses from the most severe price hikes.
Since 2019, Spain has significantly expanded its wind and solar capacity, adding over 40 GW of renewable energy. This growth places Spain among the top EU countries in terms of renewable expansion, second only to Germany, whose power market is twice the size of Spain’s. As a result, Spain’s electricity prices are less affected by the fluctuating cost of gas. For instance, after the Iran war began, gas prices surged by 55% and continued to fluctuate, but Spain’s reliance on renewables has helped mitigate these effects.
In the UK, wind power has contributed to breaking new records in renewable energy generation. On 26 March, British wind energy generation reached a new high of 23,880 megawatts, sufficient to power 23 million homes. This achievement highlights the growing role of wind energy in meeting the country’s energy needs.
An analysis by SolarPower Europe revealed that harnessing sunlight for energy has saved Europe more than €100 million per day since 1 March. This translates to total savings exceeding €3 billion. If gas prices remain high, experts predict that the total savings could reach as much as €67.5 billion by 2026.
Impact of Renewable Energy on Electricity Prices
A recent report found that electricity was made on average almost 25% cheaper in some European countries between 2023 and 2025 due to the expansion of renewable energy sources. Wind and solar power have been instrumental in reducing Europe’s exposure to fossil fuel shocks.
Positive Money, an advocacy group focused on monetary reform, notes that a growing body of research shows how renewable energy can displace high-cost fossil fuel generation from the electricity mix. This displacement exerts downward pressure on wholesale electricity prices. Their report indicates that the expansion of renewable generation reduced electricity prices by an average of 24.2% over the 2023-2025 period in the 19 countries analyzed.
Data also suggests that the impact of renewables on prices becomes more pronounced as more renewable energy comes online. However, the decoupling of electricity prices from gas prices is still in its early stages in many European electricity systems.
“Our findings highlight the importance of wind and solar deployment, which, along with flexibility resources, can largely reduce Europe’s electricity markets’ exposure to fossil fuel shocks,” the group states. “By doing so, this process makes the electrification of the economy more attractive, further reducing Europe’s vulnerability to fossil fuels.”
Policy Implications and Future Strategies
Positive Money outlines two key policy implications based on their findings. In countries with limited wind and solar capacity, accelerating the deployment of these technologies is considered “low-hanging fruit” for reducing wholesale electricity prices. In countries with significant renewable capacity, scaling up flexibility resources will further enable the disconnection of wholesale prices from traditional cost drivers.
This could involve investing in batteries to store excess power, encouraging home solar adoption, and implementing policies to balance supply and demand, such as variable tariffs.
The exposure of electricity prices to fossil fuel shocks complicates the electrification of the economy, which is a key pillar of the energy transition. However, accelerating these system-wide changes leads to the decoupling of electricity prices from fossil fuel shocks, which in turn supports further electrification.
Urgency for Accelerating Trends
Ongoing events underscore the urgency of accelerating these trends. Continued fossil fuel shocks threaten Europe’s energy security, price stability, and competitiveness. In the absence of sufficiently rapid progress, Europe will remain vulnerable to the multifaceted risks associated with fossil fuel dependency.
