The surge in electricity prices broke records during the summer of 2021, with daily highs triggering alarms and putting pressure on executives. As soon as Pedro Sánchez resumed his European political work, he launched a diplomatic push in Brussels to seek solutions from Europe. First, a letter from Vice Presidents Nadia Calviño and Teresa Ribera to the main European commissioners laid out proposals for a European gas purchasing platform, strategic reserves, counter-speculation measures, and a reform of the electricity system. Then the issue was raised at every meeting and council of ministers. The strategy yielded some results, and at the start of October four more countries —France, Greece, Romania, and the Czech Republic— signed a joint statement with Spain calling for a European response.
October 2021: lukewarm response from Brussels
The European Commission’s initial reply came in mid-October in the form of a toolbox outlining measures to cushion the impact of rising gas prices on electricity bills. In essence, tax reliefs and support for the most vulnerable households and businesses were proposed, along with a commitment to explore voluntary gas purchases, but not to reform the marginal pricing system where the most expensive energy, primarily gas, drives prices. The energy broker argued that the marginal price model remains the most efficient framework for liberalized electricity markets. Kadri Simson’s remarks echoed this stance. A sharp reality check followed when Spain’s leaders’ summit on 21 and 22 October yielded little, and Spain left with limited gains. Four days later, nine countries —Germany, Austria, the Netherlands, Denmark, Finland, Estonia, Latvia, Ireland, and Luxembourg— expressed opposition to a temporary wholesale market reform, preferring the Commission’s temporary and selective measures. Spain subsequently asked Brussels for freedom to exit the electricity price system.
November 2021: a cold reception from the European regulator
The preliminary report ordered by the European Commission to the Agency for the Cooperation of Energy Regulators (ACER) did not provide clear guidance either. The analysis evaluated whether centralized gas purchases would lower prices and whether maximizing price setting would help, though it could jeopardize other targets, even if it might ease the situation in the short term.
February 2022: the Russian War
The invasion of Ukraine on February 24 exposed Europe’s political and energy vulnerability, highlighting dependence on Russian gas. Moscow had paused flows before, but the conflict underscored the risk. Commission estimates showed gas from Russia in June 2022 running about 30% below 2016–2021 levels due to a series of abrupt, unilateral actions by Russia. The latest working documents condemned supply disruptions to Baltic states, Poland, Bulgaria, and Finland, and noted partial suspensions affecting Germany, Austria, Denmark, Slovakia, the Netherlands, and Italy.
March 2022: the Iberian exception arrives
Despite the 27-member bloc’s reluctance to reform the electricity market or separate gas and electricity prices, Spain and Portugal advanced an Iberian initiative. This mechanism allowed intervention in the wholesale market to cap gas costs for electricity generation, leveraging their high renewable energy shares and limited interconnections with the rest of Europe. After lengthy deliberations and despite ACER’s cautious conclusions, which warned against redesigning the European electricity market, an in-principle agreement was reached by the Commission, Spain, and Portugal by the end of the study. In early June, Brussels authorized a mechanism to operate until May 31, 2023.
May 2022: Cutoff of Russian gas
The growing gas shortage risk pushed the EU to act on a plan to end reliance on Moscow and diversify supplies. The target was to reduce imported gas from 155,000 million cubic meters in 2021 to 100,000 in 2022, with a five-year horizon to end dependence. A key element was the commitment to fill underground gas storage to about 80% ahead of winter.
July–September: Gas and electricity savings plan
An emergency plan emerged to prevent a winter gas shortage, including a 15% reduction in gas consumption from August to March 2023, with Spain and Portugal exempt due to their limited interconnections. Measures encompassed auctions to curb heating and cooling, a preference for coal and nuclear if needed, and support for industries to cut consumption. The aim was to moderate the extreme electricity price spikes, and after a year of discussion, Brussels accepted the challenge.