Structural changes in energy markets and price implications: effects of the recent energy crisis and perspectives of the green transition

Abstract:

Over the last year and a half, the weaponisation of natural gas supplies by Russia led to concerns over security of supply, in Europe and globally. Significant gas price spikes contributed to high electricity prices.

This analytical piece focuses on three points: (1) the necessary distinction between short-term spikes driven by fossil fuel supply and demand mismatches versus the long-term effects of the transition, (2) the different lessons that could be learned regarding energy price components and market expectations from the 2021-2022 crisis and (3) the implications of the ongoing structural change in the energy and electricity mixes on prices. It finally argues that the key question might not only be if the green transition has an overall upward/downward impact on prices but also the impact of its different dimensions and how these can be better managed through policy decisions and the pace of the transition itself.

Commentary and Analysis

London School of Economics (LSE): Business Review Blog, 16/11/2023: More expensive natural gas widened the differences in power prices within the EU https://blogs.lse.ac.uk/businessreview/2023/11/16/more-expensive-natural-gas-widened-the-differences-in-power-prices-within-the-eu/

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