Renewables cushion Europe power prices despite Iran conflict shock

Wednesday 18 March 2026 - 09:50

By: Dakir Madiha

Renewables cushion Europe power prices despite Iran conflict shock

European electricity markets are proving more resilient than expected to the Middle East energy crisis, as rapid expansion in wind and solar generation limits the impact of surging gas prices, according to a Bloomberg analysis.

Gas prices in Europe have risen by more than 50 percent since late February, when the United States and Israel launched strikes against Iran. Despite this, power contracts in Germany and France declined last week. Analysts at Rabobank estimate that without renewable energy output and seasonal demand reductions, electricity prices in Europe would already be about one third higher.

The contrast with the 2022 energy crisis is notable. At that time, Russia’s invasion of Ukraine drove gas prices to record levels and triggered widespread inflation. Today, increased renewable capacity is helping to stabilize markets. Solar output is entering a seasonal upswing, with Germany’s production expected to rise by 25 percent year on year in April, while wind generation could increase by as much as 70 percent. France’s nuclear fleet, which faced maintenance issues during the previous crisis, has also returned to full capacity.

Germany has already recorded negative electricity prices during daytime hours since mid February, a pattern typically seen later in spring. Solar generation is increasingly setting daytime prices, pushing gas-fired plants to operate mainly during evening peaks. Spain, which has doubled its wind and solar capacity since 2019, has started 2026 with some of the lowest electricity prices in Europe. According to Ember, renewable expansion in Spain has reduced gas influence on electricity pricing by 75 percent.

However, vulnerabilities remain. During evening hours, when solar output drops and demand stays high, electricity prices have surged sharply, exceeding 400 euros per megawatt hour in the Netherlands. The broader economic impact is also significant. Ember estimates that rising fossil fuel costs added 2.5 billion euros in extra expenses for Europeans in the first 10 days of the conflict. Gas-based power generation costs in the European Union have doubled, affecting energy-intensive industries and countries still heavily reliant on gas, including Italy and Belgium.

European Union leaders meeting in Brussels on March 19 face mounting pressure to respond. European Commission President Ursula von der Leyen is expected to present measures including gas price caps, tax reductions on energy, and proposals to decouple electricity pricing from volatile gas markets. Analysts say expanding clean energy remains the most effective long term protection against price shocks.