Renewables build-out leaves retail power costs elevated across U.S., Europe and Asia

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Renewables and retail power costs

Highlights

Despite increased solar and wind penetration, fossil fuels still set wholesale electricity prices 58–65 per cent of the time in Europe, UK, Australia and PJM.
Retail electricity costs rose 33 per cent in the U.S. from 2019 to 2025 and are 31 per cent above prior averages in the EU, driven by grid and procurement costs.
BloombergNEF projects Texas wholesale power prices will average $86 per MWh over the next decade, 60 per cent above 2025, while German and UK prices may fall 20–26 per cent below 2025 levels by 2035.

Wholesale pricing dynamics and market constraints

As reported by Financial Times, citing BloombergNEF, stronger solar and wind generation in the U.S., Europe and Asia is beginning to reshape intraday wholesale electricity prices, including more frequent negative pricing periods in markets such as Spain during sunny midday hours.

But the report says this shift does not yet produce a meaningful reduction in average annual wholesale power prices. Solar and wind typically do not set clearing prices because they often bid at or below zero and are dispatched ahead of other sources, leaving fossil fuels to determine the marginal price for many hours of the day.

In Europe, natural gas and coal set prices about 58 per cent of the time, while the share is 60 per cent in the UK, 65 per cent in Australia and 60 per cent in PJM, the largest U.S. regional grid operator. That means power markets still reflect fossil fuel costs even as renewable capacity rises.

BloombergNEF also points to curtailment as a growing obstacle. Across 27 markets in 2025, the solar and wind curtailment rate reached 10.5 per cent, showing how constrained grids and inflexible demand can prevent renewable output from displacing higher-cost generators.

Consumer bills and regional outlook

Retail electricity prices remain under pressure from factors beyond spot wholesale markets. Utilities and retailers rely on hedging and forward contracts, face shaping and imbalance costs, and often procure power at elevated prices during periods of strong demand.

Grid expansion and reinforcement add another layer of cost, and government support programmes for renewables are often recovered through customer bills. BloombergNEF says additional wind and solar deployment can raise other retail cost inputs unless different funding mechanisms are used.

In the U.S., electricity costs rose 33 per cent from 2019 to 2025, while EU prices are 31 per cent above their 2019 to 2021 average, based on energy administration data cited in the text. In PJM and in Ercot, which covers most of Texas, supply is struggling to keep pace with demand, partly because of the phaseout of solar and wind tax credits and delays to gas plants and transmission lines.

BloombergNEF forecasts Texas wholesale prices will average $86 per megawatt hour over the next decade, 60 per cent above the 2025 average. In Europe, however, it expects wholesale prices to ease as renewables, storage and grid improvements expand, with Germany averaging 20 per cent below 2025 levels between 2026 and 2035 and the UK averaging 26 per cent below its 2025 level over the same period.

Our earlier article on Mario Draghi’s warning about monetary tightening explained the policy trade-off between containing inflation and debt while still preserving investment needed for long-term growth. It highlighted his argument that keeping interest rates as low as possible within the bounds of price stability can reduce damage to productive investment, while clearer central-bank communication can narrow uncertainty around future rate paths.

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