Macro Research Report
The European Energy Pricing Mechanism: A Survey of Theory, Strengths and Limitations
Summary
This report examines the European electricity pricing mechanism, its theoretical foundations, and its implications for economic competitiveness. It outlines the institutional structure of European electricity markets and compares uniform and discriminatory pricing mechanisms, highlighting their trade-offs between efficiency, producer payments, and investment incentives. The report then evaluates the European Union's 2024 electricity market reforms, focusing on short-term market efficiency and long-term contracting through power purchase agreements and contracts for difference. While the reforms address several existing shortcomings, further improvements in market integration, competition, and contract design are needed to reduce price volatility, encourage investment, and strengthen Europe's resilience to future energy shocks.
Authors
- Adam LugossyHead of Macro Research
- Giuseppe SpinaSenior Macro Research Analyst
- Sophia C. FroehlichSenior Macro Research Analyst
- Matteo Dalla ValMacro Research Analyst
- Berend DasbachMacro Research Analyst
- Simona NeculaMacro Research Analyst
Details
- Published
- 14 October 2026
- Division
- Macro Research
- Type
- Macro Research Report
- Pages
- 27
- Authors
- 6
Cite this report
Minerva Investment Management Society (2026). The European Energy Pricing Mechanism: A Survey of Theory, Strengths and Limitations. Macro Research. https://minervaims.org/archive/the-european-energy-pricing-mechanism-a-survey-of-theory-strengths-2026
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