28. 09. 2026
AUTHOR: Neil Makaroff and Marin Gillot
While energy ministers gather for an informal Energy Council in Dublin, the European Union (EU) is caught up in yet another wave of the energy crisis. Seven months into the war in Iran, energy prices remain sharply elevated. Oil is hovering around $100 a barrel and European gas prices have hit their highest in three years this September. The shock is also visible at the pump, with diesel prices rising sharply over the summer, while tight global fuel markets and the risk of further supply disruptions continue to add uncertainty for European consumers and businesses.
This is coming at a significant cost. At the EU level, imported fossil fuels have cost an additional €90 billion since the end of February, with no additional energy to show for it. At the Member State level, governments are once again intervening to cushion households and firms. The OECD’s Economic Outlook shows particularly extensive intervention in several EU countries, including Spain, France, the Netherlands, Austria and Portugal, while broad-based price support remains common across the Union. Member States’ capacity to intervene differs widely, leaving countries with very different fiscal room to absorb the shock and increasing the risk that persistently high energy prices translate into social and political tensions.
Taken together, these pressures reinforce the case for moving away from imported oil and gas towards domestic, zero-emission electricity. That shift is already underway, with growing deployment of electric vehicles, heat pumps and other electrotechnologies across Europe. Yet the affordability debate still too often treats policies such as the EU Emission Trading System (ETS) or the Methane Regulation as convenient explanations for higher energy costs, even though the current shock is being driven by the EU’s continued exposure to volatile fossil-fuel markets. The more immediate question is whether electricity is affordable enough for households and companies to make the switch. That puts the structure of the electricity bill and the policies that shape it at the centre of the affordability debate.
Why cheaper power does not mean cheaper bills
Electricity has reacted differently to the current crisis. Wholesale power prices have risen less sharply than during the 2022 crisis triggered by Russia’s war of aggression against Ukraine. One reason is the growing share of renewables in the Union’s electricity mix: renewable electricity accounted for close to 50% of EU electricity consumption in 2025, reducing the frequency with which gas sets the electricity price. The impact is particularly visible across Member States: in the first five months of 2026, gas influenced electricity prices in only 9% of hours in Spain, compared with 75% in Italy. This translated into March power prices of €42/MWh in Spain, compared with €143/MWh in Italy.
But lower wholesale exposure does not automatically mean lower bills. Around 48% of the average EU household electricity bill reflects the energy component itself, while 26% comes from network charges and another 26% from taxes and levies. At the same time, electricity is still taxed more heavily than gas across most Member States, contributing to electricity-to-gas price ratios that remain high. Europe is therefore producing domestic, zero-emission electricity that is less exposed to international oil and gas markets, while the structure of the final bill can still discourage the switch to electricity.
Decarbonising the power sector and reducing charges and taxes on electricity are two faces of the same coin when it comes to making electrification the affordable choice.
Making electricity cheaper to use
The European Commission’s Electrification Action Plan, together with its accompanying legislative proposal to future-proof electricity bills, starts to address this affordability gap through network charges, flexibility and taxation. On network charges, the core issue is how to contain system costs as grid investment rises. Tariffs that better reward flexibility, storage and consumption at times and locations where the grid is less constrained can make better use of existing infrastructure and reduce peak demand and investment needs. The test is whether reform lowers overall system costs rather than simply shifting them between consumers.
The proposal also tackles taxation directly. It would require the minimum level of taxation on electricity to be lower than that on natural gas, while allowing reduced electricity taxation for energy-intensive businesses. The Action Plan complements this with a benchmark to bring national electricity-to-gas price ratios down to no more than 2.5 for households and 2 for industry by 2030. The political challenge now sits with Member States, which retain significant discretion over energy taxation and tariff design. Still, the proposal gives them a concrete route to address one of the structural drivers of high electricity prices, rather than relying primarily on repeated short-term relief when oil and gas prices spike. In the context of the current crisis, that would allow the affordability debate to shift towards durably lowering electricity costs across the economy.
This would shift Europe from crisis management to structural affordability. Ultimately, electrification depends on a zero-emission power mix, lower system costs and taxation that favours electricity over gas, rather than on weakening the policies that reduce fossil-fuel exposure.
Photo credit: European Union
