Europe’s prolonged heatwave is pushing European electricity prices higher as soaring cooling demand, weaker renewable output and rising carbon costs increase pressure on power markets. Italy continues to record the highest wholesale electricity prices in Europe.
Why European electricity prices are climbing during the heatwave
How much will Europe’s latest heatwave cost consumers? The answer is already emerging from wholesale electricity markets. On 24 June, Italy’s wholesale electricity price reached a daily peak of €162.66/MWh, driven not by geopolitical tensions but by exceptionally high temperatures across the continent. As Europe experiences one of its hottest periods of the year, electricity systems are coming under increasing strain, with direct consequences for both energy security and market prices.
Weekly market analyses also show significant price increases across France, Belgium, Spain, Portugal, Germany and the United Kingdom. Although higher prices during periods of extreme heat are not unexpected, the combination of factors behind the current surge deserves closer examination.
Heatwave pushes electricity demand sharply higher
Across Europe, electricity demand has increased as households and businesses rely more heavily on air conditioning and cooling systems. A powerful African high-pressure system has trapped much of the continent under extremely hot conditions, with temperatures reaching 35°C to 40°C and local peaks of 45°C in parts of Spain and France.
The response has been consistent across Europe. Air conditioners and fans are operating at full capacity, significantly increasing electricity consumption. Italy recorded the strongest increase in demand, with electricity consumption rising by 12% during the third week of June.
At the same time, electricity generation has shifted towards more expensive fossil fuel sources. Lower wind power production, combined with the temporary shutdown of several French nuclear reactors because of high river temperatures, has increased the role of gas-fired power plants since the heatwave began. Flexible gas generation has proved particularly important in meeting evening cooling demand after solar production declines.
The positive news is that European natural gas prices have fallen to around €41/MWh, close to their lowest level in two months, supported by signs that shipping activity through the Strait of Hormuz is returning to normal.
However, EU carbon emission allowances continue to move in the opposite direction. During the third week of June, carbon futures traded around €80 per tonne, reaching a peak of €81.4/t on 22 June. This combination of higher carbon costs and stronger electricity demand is adding further upward pressure to wholesale power prices.
European electricity prices rise across almost every market
According to the latest weekly analysis by AleaSoft Energy Forecasting, every major European electricity market except the Nordic region recorded price increases during the week beginning 15 June.
Spain, Portugal and France experienced the strongest weekly percentage increases, with wholesale electricity prices rising by 83%, 88% and 217%, respectively. Weekly average prices exceeded €80/MWh across almost every market, ranging from €83.13/MWh in France to €118.99/MWh in the United Kingdom. The Nordic market remained considerably lower, averaging €54.28/MWh.
The situation is expected to deteriorate further this week. In Belgium, wholesale electricity prices exceeded €1,000/MWh at 20:45 on Wednesday evening, with additional increases forecast for the following day. Exceptional hourly price spikes were also projected in Germany, reaching €665.82/MWh, and in France, where prices were expected to peak at €313.36/MWh.
