The volatility of the European energy market has taken another turn as electricity prices across large swathes of western Europe have fallen below the levels recorded at the beginning of the year, although major investors in energy-intensive industries, such as Germany's BASF, have already issued a bleak outlook for their local operations. 

The day-ahead market (DAM) price of wholesale electricity across 11 European countries is now lower than it was at the beginning of 2022, before Russia’s unprovoked invasion of Ukraine and weaponisation of gas supplies sent energy prices spiralling.


The DAM price is the wholesale electricity price negotiated for the day-ahead, following the trading process of different geographical areas over the previous 24 hours. DAM prices for wholesale electricity in Germany stood at €68.86 per Megawatt-hour (MWh) on November 1, which is 16.6% lower than the beginning of the year.

The largest declines in wholesale electricity prices between the first days of January and November were registered in Norway (45.1%), Malta (27.19%), Italy (27.87%), the Netherlands (24.69%), Sweden (22.85%) and Belgium (16.61%), according to fDi calculations based on DIEM Platform figures.

But while major economies in western Europe seem to have reigned in an electricity market that appeared out of control only a few weeks back, several countries in emerging Europe remain in dire straits.  

DAM prices in the Baltic countries of Lithuania, Latvia and Estonia stood at almost €240/MWh on November 1, a 190% increase from the first day of 2022. Other countries with higher electricity prices in November than January include Finland (€236/MWh), Serbia (€177/MWh), Bulgaria and Romania (both €156/MWh). The main manufacturing hubs in eastern Europe also continue to experience very high electricity prices, from Hungary, where prices on November 1 were 56.7% higher than at the beginning of the year, to Poland (+31.78%) and the Czech Republic (+40.72%).  

The war in Ukraine has driven up gas prices and the cost of producing electricity in gas-fired plants across Europe, while heat waves have crippled hydroelectric and nuclear energy generation. Due to the marginal cost pricing model, the price of wholesale electricity is set by the most expensive operating plant.

This combination of factors has caused DAM prices for electricity across Europe to go on a rollercoaster ride this year. Compared to an average European wholesale price of about €190/MWh on February 1, prices in some countries reached more than €600/MWh by September, including in Austria, France, Hungary and Malta. 


Wholesale electricity prices had come down significantly by October in many European countries, due to a fall in the price of natural gas prices and an increase in wind-energy production. Despite temporary relief and the European Commission’s plans to reform the electricity market, volatility has weighed heavily on energy-intensive sectors. 

BASF, the world’s largest chemical company by revenue, said on October 26 that it will have to “permanently” downsize in Europe due to higher energy prices making the continent less competitive.

“The significant increase in natural gas and electricity prices over the course of this year is putting pressure on chemical value chains,” Martin Brudermuller, the CEO of BASF, said in the company’s third-quarter 2022 earnings call. 

The company expects to see “structurally higher and volatile” natural gas prices in Europe in the medium- and long-term. Amid this backdrop, some European countries have used their energy independence as a means to promote themselves to investors, such as Lithuania.