European electricity market: developments, dynamics and prospects in 2025 – and for 2026

In 2025, the European electricity market continued to be influenced by major structural changes. The energy transition, volatile geopolitical conditions, ambitious climate targets, and technological developments have further increased the demands on security of supply, flexibility, and economic efficiency. Particular focus was placed on the desired decarbonisation, the accelerated expansion of renewable energies, and their integration into an increasingly digitalised, volatile electricity system.

Germany remained one of Europe’s most important reference markets. As Europe’s largest economic power, its actions are of particular importance and have an impact on all other European countries. At the same time, the conditions and events in other European countries also have a reciprocal effect on the German electricity market.

So, as the year slowly draws to a close, what were the key market data and events for Germany, accompanied by relevant developments in neighbouring countries such as France, Switzerland, Austria, Belgium, and Scandinavia?

Price development: Spot market under pressure from volatility

Spot market prices were volatile in all European countries, both over the course of the month and, in some cases, over the course of the day. The fact that this was mostly caused by exogenous events reflects, among other things, the complexity of the market.

In Germany, spot prices rose slightly over the course of the year: the average day-ahead price was around EUR 86.6/MWh, which was above the previous year’s figure of around EUR 78/MWh. The greatest burden arose in the first quarter of 2025 (at EUR 111/MWh), from which prices fell only slowly and incrementally to around EUR 86.6/MWh over the course of the year. Additional drivers were seasonal peak loads, increased weather volatility, and regional grid bottlenecks.

At the same time, June 2025 saw historic highs in negative electricity prices – over 140 hours with prices below zero show how much the flexibility requirements in the system have grown. At the same time, however, they also show how important electricity price purchasing and a forward-looking strategy have become.

An international comparison revealed a heterogeneous price structure: while Switzerland and Austria recorded higher prices in some cases (above EUR 110/MWh), France (around EUR 74/MWh) and (above all) Scandinavia remained structurally cheaper with spot market prices below EUR 70/MWh – particularly due to high hydroelectric power shares and stable wind conditions.

Futures market: CO₂ prices and flexibility premiums are rising

The futures market reflected uncertainties regarding CO₂ pricing, gas availability, and regulatory intervention. With a few exceptions, the 2026 annual futures fell continuously over the course of the year. The range of prices was between EUR 85/MWh and EUR 95/MWh. The behaviour of futures – up in the winter months, down in the summer months – was in line with expectations.

The rising importance of storage and flexibility options is also increasingly reflected in price structures, particularly for peak load products and balancing energy. CO₂ certificate prices rose by approximately 11% compared with the previous year, thereby significantly influencing the marginal costs of conventional power plants. The expected increase in CO₂ certificate prices will keep electricity costs at a high level, even though there would be potential for reduction via the merit order.

Expansion under conditions of electricity generation, capacity development

Gross electricity generation in Germany in 2025 (Q1-Q3) was around 365-370 TWh, with approximately 55%-57% covered by renewable energies. Photovoltaics and wind power made a significant contribution, but with highly seasonal fluctuations in availability, which is also reflected in price volatility.

A particularly windless spring reduced the expected wind power production. Since a good 50% or more of renewable energy is generated from wind power, the effects were all the more noticeable in the price of electricity.

At the same time, photovoltaic expansion reached new highs and is expected to have a dampening effect on prices, provided the weather cooperates. Conventional generation (coal, gas), on the other hand, continued to decline, while new gas-based capacities (H2-ready) remain in the planning stage.

The storage landscape continued to develop noticeably: battery storage with around 2.1 GW of installed capacity supplemented the existing pumped storage capacities. However, redispatch measures and grid bottlenecks continued to lead to additional cost burdens in the system.

Neighbouring countries:

• France relied on the stability of its nuclear power generation system (approx. 69% share) and, despite rising renewable energy shares, showed clear overproduction – with increasing exports.
• Switzerland remained a storage and export market with a central role in cross-border balancing.
• Austria intensified the expansion of wind and solar power but remained burdened by grid bottlenecks.
• Belgium stabilised its nuclear energy capacities, while increasing peak loads from data centres created pressure for flexibility.
• Scandinavia proved itself to be a reliable electricity exporter with a strong balancing energy function thanks to its high hydro and wind coverage.

Electricity demand trends towards electrification, but remains uneven

Demand trends were mixed across Europe. In Germany, gross electricity consumption was >500 TWh (annual projection) – a slight increase compared with 2024. At the same time, however, this also meant a necessary net import for the third year in a row.

The drivers of demand were electromobility, heat pumps, and data infrastructures, while energy efficiency and structural change had a dampening effect. Seasonal peak loads (e.g. due to heat waves) increased.

France, on the other hand, saw stagnating demand – despite high production capacities, electrification remained sluggish. This led to net exports once again. Germany, among others, benefitted from this.

Switzerland and Austria showed slightly rising consumption figures, while Belgium developed a new peak load characteristic due to electricity-intensive applications such as data centres. Net imports are also of great importance there. Scandinavia remained stable or showed moderate growth in demand, supported by industry and digitalisation.

Special events and market interventions

Extreme weather conditions such as the summer heatwave of 2025 caused high loads on the grid across Europe and drove up prices and redispatch costs.

The blackout on the Iberian Peninsula in April 2025 revealed serious weaknesses in grid stability and led to Europewide debates on system risks, frequency control, and reliability.

Negative electricity prices reached new record levels – reflecting overcapacity, flexibility deficits, and insufficient grid connectivity.

The EU responded with a comprehensive package of regulatory measures: in addition to market mechanisms for integrating volatile renewable energies, grid expansion plans, investment incentives, and new capacity mechanisms were discussed. An EU-wide support programme for cross-border grid infrastructure with a volume of EUR 30 bn was announced.

Outlook and assessment

The European electricity market in 2025 was characterised by tensions between growing renewable shares, structural changes in supply and, in some cases, sluggish demand. Pricing remains volatile, but is increasingly determined by system flexibility and grid integration.

Germany is set to retain its role as a central market and load distributor in the European interconnected grid, but the challenges of grid capacity and storage integration are increasing. France remains a production giant with export pressure, while smaller markets such as Belgium and Austria show how structural bottlenecks or demand clusters can strongly influence market stability.

The demands on the electricity market in Europe are increasing: flexibility, grid expansion, investments in storage, and smart control technologies are not options but prerequisites for a stable, economically viable, and decarbonised electricity system.

Autor: Dimitrios Koranis

This article appeared on the 19th of December 2025 at PI Web (Plastics-Information).