23JUL

Renewables pass fossil fuels, gas bill rises

3 min read

19:31UTC

Wind and solar generated more EU electricity than fossil fuels for the first time in 2025, yet the power sector's gas bill still climbed 16%.

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EconomicDeveloping

Key takeaway

Wind and solar hit 30% of EU generation in 2025, but the gas bill still rose 16% on hydro shortfalls.

Ember published its European Electricity Review showing wind and solar exceeded fossil fuels in EU electricity generation for the first time in 2025: renewables at thirty percent against fossil fuels' share. The milestone marks a structural shift in the generation mix. But the EU power sector's gas import bill still reached EUR 32 billion in 2025, up 16% year-on-year, because gas generation itself rose 8% to compensate for reduced hydro output.

The transition insulates unevenly. Spain is largely protected from TTF pass-through; Italy, the Netherlands, and Belgium are fully exposed. Ember's data confirms that the merit order mechanism, where the most expensive fuel needed to meet demand sets the price for all generation, means gas retains pricing power far beyond its share of actual generation. In markets where gas sets the marginal price most hours (Italy being the clearest case), the rising renewables share delivers environmental benefit but limited consumer price relief.

The structural implication for traders: EU-wide renewables statistics overstate the degree to which the bloc is insulated from gas price shocks. Market-by-market merit order composition, not aggregate generation share, determines price exposure.

Deep Analysis

In plain English

In 2025, for the first time ever, European wind turbines and solar panels produced more electricity than all fossil fuels combined. This sounds like a major milestone for clean energy, and in generation terms it is. But here is the complication: Europe's gas import bill for electricity still went up by 16%, to EUR 32 billion. This is because wind and solar do not blow and shine all the time. When they stop, something else needs to fill in quickly, and right now gas stations are the primary backup. Gas is now used less for routine power but more for emergency top-ups, which happen to be at the most expensive market hours.

Deep Analysis

Root Causes

The simultaneous achievement of renewable majority and rising gas bills reflects the merit order's structural mechanics: wind and solar push gas out of baseload hours but increase gas's role in marginal hours, where gas must provide rapid ramping to cover renewable generation shortfalls.

Gas-fired plants running fewer hours but at higher marginal prices can generate the same or higher revenue, and their fuel costs per unit of production are higher because they operate less efficiently at low capacity factors.

The hydro shortfall is the second structural factor. European reservoir hydro output fell 8% in 2025 due to below-average Alpine snowpack and drought in Iberia's river basins. Gas compensated for this on an essentially unplanned basis, at spot prices, because the hydro shortfall was not foreseeable six months in advance when storage injection contracts were placed.

What could happen next?

Consequence
The EUR 32 billion gas bill for power generation creates a permanent structural argument for accelerating battery storage and interconnection investment, as each alternative capacity unit reduces the volume of spot gas purchased at peak prices.
Risk
If Alpine hydro output continues below long-run averages due to climate-related snowpack decline, gas compensation demand will remain a structural feature of EU electricity markets regardless of renewable capacity growth.

Source Landscape

This story draws on mixed-leaning sources from Belgium

Belgium

LeftRight

Primary parallel: Germany's Energiewende faced the same paradox in 2013-16: renewable capacity exceeded coal and nuclear in installed capacity, but gas and coal consumption still grew as hydro output fell and solar/wind variability required flexible backup generation. German industrial gas consumption peaked in 2016, not 2013 as originally modelled, because the transition created demand for flexible gas backup that the original planning had not fully accounted for.

Counter-parallel: Denmark reached over 50% wind generation share in 2015 without a corresponding gas demand rise, because Danish interconnectors with Norway and Sweden provided hydro balancing at marginal cost. The EU-wide position lacks this balancing capacity: Norwegian hydro is insufficient to backstop the whole continental grid.

The EUR 32 billion gas bill on top of significant EU wind and solar subsidies (estimated at EUR 50-60 billion annually in feed-in tariff and contract-for-difference obligations) suggests the EU is paying for two energy systems simultaneously. The renewable subsidy cost supports low-carbon capacity; the gas bill pays for the flexibility that makes renewables-heavy grids operational.

The critical policy implication: EUR 32 billion in annual gas purchases is the economic incentive for accelerating battery storage, demand response, and cross-border interconnection. Each percentage point reduction in gas-at-the-margin hours reduces the gas bill by approximately EUR 640 million at current prices, providing a precise investment return metric for flexibility alternatives.

Consensus view: Ember lead analyst Dave Jones assessed that the 2025 result is an efficiency paradox: wind and solar achieved generation majority, yet gas demand rose because the energy transition has not yet replaced gas in its two remaining dominant roles (heating load following and hydro backup). The EUR 32 billion gas bill reflects that these residual uses involve purchasing gas on spot at peak prices, not baseload contract prices.

Counter-view: The Institute for Energy Economics and Financial Analysis (IEEFA) argued that the EUR 32 billion figure overstates the structural problem: a significant portion reflects strategic storage injection at elevated prices, which is a deliberate choice rather than unavoidable demand. If the EU had maintained pre-crisis storage norms, the actual operational gas bill would be approximately EUR 18 billion, with the premium attributable to forced emergency injection.

Key tension: Whether the rising gas bill despite renewables majority reflects an unavoidable structural transition gap (requiring a decade of further investment in seasonal storage alternatives) or a policy failure in gas demand management (solvable through accelerated heat pump deployment and demand flexibility mechanisms).

Sources:Bruegel·Ember

Mentions:Russia →Ember →European Union →Netherlands →Denmark →Belgium →Prima →Italy →Sweden →Norway →Germany →TTF →

First Reported In

Update #1 · Europe's thinnest gas cushion since 2018

Bruegel· 13 Apr 2026

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Causes and effects

This Event

Renewables pass fossil fuels, gas bill rises

The paradox of rising renewables share alongside a rising gas bill exposes the merit order's structural flaw: even a minority fuel can set prices for the majority of hours.

Led to

Spain power jumps 148% in two days on low wind

The Ember renewable generation thesis (wind/solar exceeding fossil in 2025) is tested in real time as low-wind conditions push Spanish gas peakers into the merit order.

Occurred 15 Apr 2026

Read story →

Different Perspectives

French industrial power consumers

France's day-ahead discount to Germany has nearly closed as TTF and EUA rise together on both sides of the border, eroding the arbitrage French industry relied on through the summer. A standing negative spark removes the German demand buffer that kept that spread wide.

TTF trading desks

Desks are reading the inversion as an injection-arbitrage trade: buy TTF at EUR 62.4/MWh now, accept the near-term loss on the spread, and sell into the winter strip once caverns are forced back into the market. The 0.8 GWh/day German print makes that trade increasingly asymmetric.

Oxford Institute for Energy Studies

Two straight sessions of negative clean spark spread confirm gas has stopped setting German power prices cleanly; CCGT dispatch now follows the spread's sign, not storage need. Caverns quitting the prompt bid on 21 July is that mechanism working exactly as the structural read predicts.

European Commission

State-aid approval for StromVKG has not been granted, a status Bundesnetzagentur's own scheme page confirms, and Brussels was not consulted before the auction opened. Every award from the 8 September deadline stays exposed to a formal proceeding or clawback once the Commission rules.

Bundesnetzagentur

Bundesnetzagentur opened the first 4.5 GW StromVKG capacity auction on 21 July, bids due 8 September, without waiting for EU state-aid clearance. Berlin is treating Germany's 24% share of EU storage as urgent enough to move first on capacity and negotiate the state-aid question with Brussels afterwards.

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