The Crisis of the Electricity Sector in the EU Countries: Dynamics, Driving Forces, and Prospects

• Published in: Studies on Russian economic development 2024-02, Vol.35 (1), p.60-71
• Main Authors: Zhukov, S. V., Reznikova, O. B.
• Format: Article
• Language: English
• Subjects: Climate change; Consumers; Crises; Economics; Economics and Finance; Electricity; Energy; Energy development; Energy industry; Energy prices; Energy shortages; Energy transition; Geopolitics; Industries and Interindustry Complexes; International Economics; Long term; Nuclear energy; Obsolescence; Prices; Solar energy; Trends; Wind power
• ISSN: 1075-7007; 1531-8664
• DOI: 10.1134/S1075700724010180

— Most studies of the current crisis in the EU electricity sector offer a simplified approach to the interpretation of its dynamics and causes. In this article, the approach is expanded, i.e., first, the crisis in the European electricity sector is considered taking into account the long-term trends of its development. Second, the main trends in the performance of individual electricity sectors and in the context of EU member countries are analyzed in detail. This approach allowed us to draw the following fundamental conclusions: the crisis in the EU electricity sector began in 2021 and was caused by the mistakes of regulators who excessively urged the construction of generating capacities in “green” energy and decommissioning of capacities that traditionally provided basic loading in the system; the crisis of 2022 was provoked by the unreliability of nuclear generation due to the obsolescence of reactors, as well as the failure of hydropower due to long-term climate change. The exogenous shock generated by the geopolitical crisis in and around Ukraine became an important factor in the outbreak of a protracted crisis in the European electricity sector. The European Commission and some major European countries proposed to accelerate the construction of generating capacities in solar and wind energy to overcome the crisis, while shifting the costs of the energy transition, the price of which has noticeably increased, to end consumers of electricity. There is a representative group of countries in the EU whose national climate strategies are based, among other things, on promoting nuclear energy, which requires the development of the capacity market; in general, energy prices in the EU soared and further development of “green” energy will by all means push electricity prices up.