Renewable penetration, fossil-fuel shock exposure and sustainable electricity price resilience in the EU
Year: 2026
Type: article
Abstract: This paper examines whether renewable electricity penetration improves sustainable electricity-price resilience in the EU by reducing wholesale electricity prices’ exposure to fossil-fuel shocks. The dataset covers EU-27 country-years over 2000–2024, while the effective wholesale-price regressions contain 219 observations from 25 countries, concentrated mainly in 2016–2024 after transformations and lags. European natural-gas prices are treated as the principal fuel-price shock because gas is more directly connected to marginal electricity-price formation in European markets. Using first-differenced country fixed-effects regressions with country-clustered and Driscoll–Kraay standard errors, complemented by cumulative local projections, the paper tests whether lagged wind-solar penetration moderates gas-price pass-through. Gas-price growth has a large and robust positive association with wholesale electricity-price growth. Higher wind-solar penetration is associated with lower conditional price growth, while its estimated role in moderating contemporaneous and cumulative gas-price pass-through is limited and statistically uncertain. Brent and WTI results are retained as benchmark comparisons. Taken together, the findings link higher renewable penetration to more favorable conditional price dynamics and point to the importance of reduced gas dependence, storage, flexibility, interconnection and market-design measures that limit fossil marginal price-setting.
Source: Sustainable Futures
Authors: Shahi Md. Tanvir Alam, Daniel Stavárek
Institution: Silesian University in Opava
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $2,340
OpenAlex ID: W7222876927