European policymakers have for years promised that more renewables would mean lower electricity prices. Spain is now being held up as proof that this vision is working. Prices there have indeed been significantly lower than in much of northern Europe.
At best, that narrative is incomplete; at worst, it’s misleading. In fact, lower energy prices depend less on a nation’s wind and solar capacity and more on how electricity systems are structured.
Take the comparison between Spain and the north-west European market – Germany, the Netherlands and Belgium. Spanish wholesale electricity prices in the first months of 2026 have averaged roughly half those seen in the Netherlands and Germany. Price spikes – the moments that matter most for consumers – are also far less severe.
But this isn’t simply because Spain has more renewables. It is because Spain is less exposed to the wider European pricing system.
Electricity markets in north-west Europe are tightly coupled across borders. The Netherlands, Belgium and Germany behave, in practice, like a single pricing zone. When gas-fired generation is needed anywhere in that system, it sets the price across all of it. The result is a form of price contagion: scarcity in one part of the system rapidly becomes price pressure everywhere.
Spain is different. Its interconnection with the rest of Europe remains limited, largely via France. That relative insulation means Spanish prices are still more strongly influenced by local conditions – including the availability of renewables.
This distinction matters, as it shows that interconnection does not just spread efficiency — it also spreads high prices.
But there is a second, even more troubling issue, visible in the Dutch system. The Netherlands has invested heavily in both offshore and onshore wind. In theory, this should provide a powerful buffer against gas-driven price volatility. In practice, the data suggest something else is happening.
Offshore and onshore wind respond to the same weather patterns. When it is windy, both should generate strongly. Offshore wind behaves as expected, frequently operating near full capacity. Onshore wind does not.
Despite having a larger installed base, Dutch onshore wind rarely reaches even a third of its potential output. Its production rises and falls with the weather — but appears consistently capped. At the same time, gas-fired generation continues to follow daily demand patterns, even during periods of strong wind.
This is not what an unconstrained system looks like. If all available wind power were being used, gas generation should fall significantly during high-wind periods. But in the Netherlands, onshore wind was constrained such that up to end of March 2026 nearly 4TWh of green electricity never made it to the system. Instead, fossil generation remains embedded in the system’s core operation, whilst lower-cost renewables are constrained.
The most plausible explanation for this situation in the Netherlands is structural. Offshore wind is connected directly to the high-voltage transmission network and fully integrated into the market. Onshore wind, by contrast, is largely connected at the distribution level, where local network constraints can limit how much power actually reaches the wider system.
In other words, not all renewables are equal. Transmission-connected assets flow freely and shape prices. Distribution-connected generation can be constrained, curtailed or simply prevented from fully participating in price formation. The consequence is profound. Europe can build large volumes of renewable capacity – and still fail to fully realise its benefits. This is not a technical glitch. It is a design issue.
European electricity markets are built around marginal pricing and cross-border coupling. These mechanisms were designed for a system dominated by large, dispatchable power stations. In a renewables-heavy system, they can produce very different outcomes – most notably, they can: propagate gas-driven price shocks across entire regions; dilute the impact of local renewable abundance; and, in some cases, prevent available low-cost generation from displacing fossil fuels.
The result is a growing disconnect between the political narrative and the physical reality of the system. More renewables do not automatically mean lower prices. Not if those renewables are constrained. Not if prices are set elsewhere and not if market design continues to prioritise system-wide optimisation over local resource utilisation.
Spain’s experience shows what happens when local conditions still matter. The Netherlands shows what happens when they do not. Europe must now choose whether to expand renewable capacity within a market structure that was never designed for it — and accept the resulting distortions.
Or it can confront a more difficult question: How should electricity markets work in a system where the cheapest energy is not scarce, but abundant — and not always where the market expects it to be?
Until that question is addressed, the promise of cheap, clean power will not be realised.
Mike Parr is director of PWR, a UK-based company providing market research and technical support in the field of renewables and energy efficiency.
Source:
www.euractiv.com