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The Iberian Exception: what was the cost of distorting electricity markets during the 2021-23 European energy crisis?

Author

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

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Hei Kan Lou & Michael G Pollitt & David Robinson & Angel Vargas Arcos, 2025. "The Iberian Exception: what was the cost of distorting electricity markets during the 2021-23 European energy crisis?," Working Papers EPRG2513, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg2513
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    References listed on IDEAS

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    1. Peter Cramton, 2017. "Electricity market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 589-612.
    2. Michael G. Pollitt, 2019. "The European Single Market in Electricity: An Economic Assessment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 63-87, August.
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    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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