Winners and Losers of the Energy Crisis: Interview with Atlantico
Natalia Fabra, Clément Leblanc, and Mateus Souza took part in an interview with Atlantico discussing the distributional effects of the European energy crisis and the policy lessons from the Iberian electricity market. The interview is based on their working paper, “Winners and losers from the energy crisis: Policy lessons from the Iberian electricity market,” which analyzes inframarginal rents during the crisis and evaluates the impact of the “Iberian mechanism” on electricity prices and consumer bills.
An English translation of the interview is available below.
The original French version can be consulted here.
Atlantico: You published a study entitled “Winners and losers of the energy crisis: Policy lessons drawn from the Iberian electricity market.” Based on your calculations, who are the winners of the energy crisis in light of the lessons from the Iberian electricity market? What types of producers benefited the most from inframarginal rents during the energy crisis, and why were these rents able to accumulate so quickly?
Natalia Fabra, Clément Leblanc, Mateus Souza: The energy crisis generated a large transfer of surplus from consumers to electricity producers. The main winners were power plants whose revenues were linked to the wholesale price but whose costs did not increase with gas—particularly nuclear, large hydropower, and renewables. Since the European market is organized as a uniform-price auction system, the most expensive technology needed to meet demand sets the market price for all electricity. When gas prices surged, wholesale prices rose proportionally, allowing inframarginal technologies to benefit from a large increase in rents. These rents accumulated quickly because the shock was both large and persistent, electricity demand is relatively inelastic in the short run, and a large share of Iberian generation comes from low marginal-cost technologies.
The “Iberian solution” reduced the effective marginal cost of gas-fired power plants, thereby limiting the pass-through of the gas shock to the electricity price. Our estimates indicate that between summer 2021 and summer 2023, this mechanism reduced consumers’ bills by about €13 billion, with no budgetary cost, because it was financed by a surcharge on the beneficiaries rather than by general taxation.
You show that Spain and Portugal were the only countries to intervene directly in the wholesale market. Spain and Portugal decoupled electricity prices from gas prices. Did this measure significantly reduce consumers’ bills, with limited impact on public finances? Did this intervention provide proportionally greater support to low-income households?
Yes. The policy capped the price of gas used for electricity generation, thereby preventing the full pass-through of higher gas costs to wholesale electricity prices. Although the mechanism required a compensatory contribution on electricity bills to reimburse gas producers for the difference between the set cap and the fuel’s actual cost, the net effect for consumers was clearly positive: bills were significantly lower than they would have been without this intervention. Above all, this result was achieved without burdening public finances, since the compensation was financed within the electricity system rather than through the state budget.
All households benefited from the generalized decline in wholesale prices, but low-income households benefited proportionally more. In this sense, the mechanism provided genuine relief in terms of wealth distribution and helped combat energy poverty.
Your work relies on detailed consumption data by postal code. Which household profiles were most vulnerable to the crisis, and which targeted policies would better protect them in the future? Who were the losers of the energy crisis and why?
The price shock increased bills for all consumer groups. However, vulnerability was far from uniform. The most exposed households were those living in the hottest regions of southern Spain, where summer electricity demand—especially for air conditioning—is high precisely when gas-driven wholesale electricity prices, pushed upward, reach their peak. In these regions, households in the lowest income quintiles were hit hardest in relative terms, because energy expenditures represent a larger share of their budget and their homes and appliances are often less energy-efficient.
Beyond price interventions such as the Iberian mechanism, non-price measures also helped curb demand during peak periods (for example, restrictions on air conditioning in public buildings and commercial establishments). In the future, beyond reforming market architecture, the most effective targeted protections should combine: income-based bill payment assistance during crises, focused on vulnerable households; and large-scale energy efficiency programs, prioritizing improved insulation and the replacement of inefficient air-conditioning systems in low-income housing.
The Iberian mechanism reduced wholesale prices, but it also increased exports to France. What does the 2021–2023 crisis reveal about the limits of the current architecture of the European electricity market? What priority reforms would you recommend in the short and medium term, based on lessons from the Iberian electricity market?
Exports to France increased because the Iberian cap lowered Iberian wholesale prices relative to neighboring markets, thereby creating predictable cross-border flows. This episode illustrates a major limit of the EU’s current architecture: national interventions in an integrated market can distort trade if they are not coordinated at the European level.
The crisis therefore highlighted the mismatch between a fully integrated wholesale market and crisis-management tools that are essentially national.
