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The Iberian exception: What was the cost of distorting electricity markets during the 2021–23 European energy crisis?

Author

Listed:
  • Lou, Hei Kan
  • Pollitt, Michael G.
  • Robinson, David
  • Arcos-Vargas, Angel

Abstract

European wholesale power prices increased to an unprecedented level during the energy crisis in 2022. To tackle the adverse impact on consumers, Spain and Portugal implemented the Iberian Exception (IE) in June 2022, intending to decouple power prices from the rest of Europe to reduce consumer energy bills, via capping the price of gas for power plants. The ‘exception’ was allowed by the European Commission (on behalf of the EU27) because it was deemed to be likely to have a limited pan-European impact on electricity prices. We focus on the direct impact of the policy on gas demand in Spain and in Europe via examination of the bid stack in the Iberian electricity market.

Suggested Citation

  • Lou, Hei Kan & Pollitt, Michael G. & Robinson, David & Arcos-Vargas, Angel, 2026. "The Iberian exception: What was the cost of distorting electricity markets during the 2021–23 European energy crisis?," Energy Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:eneeco:v:157:y:2026:i:c:s0140988326001672
    DOI: 10.1016/j.eneco.2026.109288
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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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