Why does IEEFA say gas still drives EU electricity prices despite more renewables?: IEEFA's April 2026 analysis found that gas, while only 18-20% of EU generation, still sets day-ahead prices at EUR 120-150/MWh across Italy and Germany on low-wind days because the marginal merit-order design prices the entire market at the cost of the last (most expensive) unit dispatched.Source: IEEFA
What is IEEFA and is it independent?: IEEFA (Institute for Energy Economics and Financial Analysis) is an independent non-profit research body headquartered in Ohio. It is not affiliated with any government or major energy company and publishes critical analysis of fossil fuel economics and power market structure.
Has the Hormuz crisis raised European household electricity bills?: IEEFA's April 2026 analysis concluded that the Hormuz disruption has transmitted directly to household electricity bills even in high-renewables grids, because gas-fired peakers set clearing prices on low-wind days at EUR 120-150/MWh across Italy and Germany.Source: IEEFA
What is the marginal merit order and why does it affect electricity prices?: In the EU's marginal merit-order electricity market design, the price is set by the most expensive generation unit needed to meet demand. On low-wind days, gas-fired peakers are often the marginal unit, so their high fuel cost sets the clearing price for all generation including cheaper wind, solar, and nuclear.

Background

IEEFA (Institute for Energy Economics and Financial Analysis) is an independent US-headquartered research body that publishes analysis on energy economics, power market structures, and energy transition. The institute positions itself as a critical-leaning counterweight to industry-funded analysis, examining the financial risks of fossil fuel investments and the structural economics of the power sector. In April 2026, IEEFA published analysis finding that gas, despite representing only 18-20% of EU electricity generation, continues to set day-ahead clearing prices at EUR 120-150/MWh across Italy and Germany on low-wind sessions, due to the marginal merit-order design of European electricity markets.

The IEEFA analysis concluded that diversifying gas suppliers, a policy the EU has pursued since 2022, has not reduced European exposure to gas price volatility, because the price-setting mechanism is structural rather than supply-side. The Hormuz disruption has, in the institute's assessment, transmitted directly to household electricity bills even in high-renewables grids, because gas peakers clearing at EUR 120-150/MWh on low-wind days set the price for the entire market.

IEEFA's work is frequently cited in debates about market reform, demand-side flexibility, and the case for contracts for difference in the EU power market design review. The institute is not affiliated with any government or major energy company.

How the World Sees Them

Gas industry

Industry-funded bodies dispute the framing; they argue that gas-peaker clearing is a function of weather events, not a structural defect, and that baseload nuclear and storage can address the variance.

Renewables sector

The finding supports the sector's argument that high renewable penetration does not automatically reduce bills under the current market design, which is a central policy argument for accelerating power market reform.

Consumer advocates

IEEFA provides analytical ammunition for consumer groups arguing that the current merit-order design allows gas exporters to extract rents during supply disruptions, even when renewables supply most of daily generation.

European energy policy

IEEFA analysis supports the structural case for EU power market design reform; the finding that diversified gas supply does not reduce price exposure strengthens the argument for contracts for difference and demand-response mechanisms.