Background

IEEFA (Institute for Energy Economics and Financial Analysis) is an independent non-profit research institute headquartered in Lakewood, Ohio. It publishes critical-leaning analysis on energy economics, power market structures, and fossil fuel financial risk. Funding is philanthropic; IEEFA has no government or industry affiliation.

IEEFA's April 2026 analysis found that gas, representing only 18-20% of EU electricity generation, sets day-ahead clearing prices at EUR 120-150/MWh across Italy and Germany on low-wind days. The institute's key finding is structural: diversifying gas suppliers does not reduce price exposure because gas-peaker clearing is a market design issue, not a supply-side one. IEEFA's analysis supports the case for EU power market reform, particularly contracts for difference and demand-response mechanisms.

Common Questions

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.

Why does gas still set electricity prices in Europe even when renewables generate more power?

Under the EU merit-order market design, the most expensive generator running at any moment sets the price for all generators. On low-wind days, gas-fired peakers are the marginal unit and set prices at EUR 120-150/MWh, regardless of how much renewable generation is occurring.Source: IEEFA, April 2026 analysis

What is IEEFA and is it independent of the energy industry?

IEEFA (Institute for Energy Economics and Financial Analysis) is a US-based non-profit research institute funded by philanthropic donors. It has no government or energy industry affiliation and publishes critical analysis of fossil fuel market structures.Source: IEEFA about page

How much of EU electricity generation comes from gas?

Gas represents approximately 18-20% of EU electricity generation but sets day-ahead clearing prices on low-wind days due to its role as the marginal peaking unit, according to IEEFA's April 2026 analysis.Source: European Energy Markets, Update #4

How the World Sees Them

Gas industry

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

European policy

IEEFA analysis feeds directly into EU power market design review debates; the structural price-setting finding strengthens the case for contracts for difference.

Renewables sector

IEEFA's finding supports arguments that high renewable penetration does not automatically reduce electricity bills under merit-order market design, strengthening the case for power market reform.

Consumer advocates

IEEFA provides analytical support for consumer groups arguing that gas exporters 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.