A new cap is now emerging for Europe’s electricity market. The current ceiling of 4,000 euros per megawatt hour is set to rise to 5,000 euros per hour, a move confirmed by market sources cited by El Periódico de Catalunya. The update marks another step in a long chain of regulatory decisions affecting wholesale prices across the continent.
European rules state that if market prices stay above 60 percent of the established maximum for at least one hourly time unit within a region, an auction in that region or across multiple areas must trigger a higher ceiling. Specifically, the rule allows an increase of up to 1,000 euros per megawatt hour within the 24 European market participants. This week, the adjustment came into effect between 5 and 6 p.m. when Estonia, Latvia, and Lithuania briefly saw prices around 4,000 euros per MWh. This event is what prompted the official rise to 5,000 euros per MWh starting September 21, five weeks after the previous cap was exceeded. The minimum price, by contrast, remains fixed at -500 euros per MWh, a floor that has not been approached by any market to date. Still, several countries such as Germany, France, and Belgium have experienced negative hourly averages, and on some days even negative average daily prices. These dynamics illustrate how volatile and interconnected Europe’s wholesale electricity markets have become. [Source: El Periódico de Catalunya]
Historically, the margin and the floor apply across all European markets. The ceiling was not altered for some time. Prior to April, the cap stood at 3,000 euros per MWh; then, on a single day in early April, France briefly reached the upper bound between 7 a.m. and 9 a.m., with prices ranging from about 2,713 to 2,988 euros per MWh. A few weeks later, the limit was raised again to 4,000 euros per MWh. Spain joined the harmonization process later, following a formal notice from the European Commission. By July of the previous year, Spain had aligned its own maximum and minimum prices with the rest of the European market. Before this alignment, the highest price allowed in the Spanish wholesale market was 180 euros per MWh and the minimum was 0 euros per MWh. [Source: El Periódico de Catalunya]
Possible changes
The current trajectory could be the last major adjustment to the cap unless European regulators revise the approach in the coming months. The upheaval in energy prices across the continent has prompted regulatory bodies and market operators to rethink mechanisms that automatically lift ceilings when thresholds are exceeded by a wide margin. A joint European consultation, issued in May by the committee responsible for coordinating electricity market operations, asks whether the 1,000-euro increment remains the right tool once 60 percent of markets trigger a rise. It also explores the possibility of lowering ceilings after periods of stability to reduce price volatility. The committee, known for its regulatory oversight, will vote on the proposed adjustments to secure regulatory approval from ACER, the European Union agency overseeing energy markets. [Source: El Periódico de Catalunya]
France, through its regulator CRE, pushed for a targeted review of the automatic increase rule in the months following the last surge. A few days after the raise from 3,000 to 4,000 euros per MWh, CRE urged a revision or even a temporary suspension of the automatic price increase mechanism until a broader change could be agreed. The regulator argued that the 4,000-euro cap was part of a sequence that triggered an unusual, suspenseful episode in the French market driven by a unique combination of isolated and unrelated events. In their view, maintaining the automatic increase at the current pace during an energy crisis was not appropriate for the smooth functioning of the European market. [Source: El Periódico de Catalunya]
Across Europe, the debate centers on balancing price stability with market signals that reflect genuine supply and demand. Regulators want a framework that prevents excessive spikes while avoiding the dampening of investment incentives in the energy sector. Market participants watch closely as ACER and national regulators weigh revisions that could alter both the pace and the mechanics of ceiling adjustments, with the aim of preserving a reliable and predictable wholesale market in a time of volatility and transition. [Source: El Periódico de Catalunya]