Renewable Energy Weaks Wholesale Price Link, ECB Finds

The European Central Bank (ECB) has analyzed the impact of wholesale energy prices on consumer bills, revealing an uneven transmission of price changes across countries. The study found that renewable electricity generation has weakened the link between wholesale gas and electricity prices in the euro area.

In 2026, the energy price shock was smaller than the one experienced in 2021-22, with more limited increases in wholesale gas and electricity prices. Higher renewable generation has reduced reliance on gas-fired power generation, dampening the impact of higher gas prices on wholesale electricity prices.

Spain, which has a high share of renewable electricity generation, saw a substantial decline in the number of hours when gas sets electricity prices. France also experienced less reliance on gas for price-setting, while gas continues to frequently determine electricity prices in Italy.

The transmission of wholesale energy prices to consumer bills is influenced by retail pricing mechanisms, including tariffs and how frequently prices are adjusted. Taxes and charges accounted for an average 31 per cent of euro area gas prices and 27 per cent of electricity prices in 2025, limiting the direct impact of wholesale price movements on consumer prices.

Wholesale gas price changes are now expected to reach consumer gas inflation within one to three months in more than half of the euro area. Around one-tenth of the euro area is estimated to see the pass-through within four to six months, while around one-third is expected to experience it within seven to 12 months.