Nearly half—48 percent—of Europe’s electricity now comes from renewable sources like wind, solar, and hydroelectric power as of 2025. But there’s a catch: these sources typically generate the most energy during daylight hours, while demand peaks in the mornings and evenings. To meet that evening demand, many European countries still rely on gas-fired power plants, and because gas is largely imported from outside Europe, it’s a significantly more expensive energy source.
Renewables Are Cheaper, But Timing Is Everything
How do fluctuating energy sources impact electricity costs across Europe?
- In 2025, gas prices in the EU averaged between €101 and €112 per megawatt-hour (MWh).
- During peak gas usage, prices were 11 percent higher across the EU compared to 2024.
- Wholesale electricity prices increased by only 3 percent during peak solar production hours compared to the previous year.
- Battery storage capacity in Europe more than doubled between 2023 and 2025, reaching over 10 GW.
- Italy is rapidly expanding its battery storage capacity, aiming to reduce its reliance on expensive gas.
According to the European Electricity Review 2026, the average cost of electricity produced by gas in the EU varied between €101/MWh and €112/MWh in 2025. During peak gas usage hours, prices averaged 11 percent higher across the EU than in 2024. However, when clean energy, particularly solar, was abundant—typically between 7 a.m. and 4 p.m.—wholesale electricity prices only increased by 3 percent compared to the previous year. This price difference highlights the economic benefits of maximizing renewable energy use.
Looking at Germany and Spain as examples, hourly electricity prices are demonstrably lower when power is generated from renewables, like solar, and higher when gas is the primary source. This dynamic underscores the need for solutions that can bridge the gap between renewable energy production and peak demand.
One way to manage these price fluctuations is to strengthen the interconnectedness of the European Union’s electricity grid, allowing energy to flow where it’s needed when it’s needed. Another crucial strategy is to extend the duration of renewable energy availability by storing excess energy generated during the day for use during peak demand periods when production dips.
The cost of battery technology has fallen dramatically over the last decade, averaging a 20 percent decrease each year, making it increasingly competitive today. This cost reduction is a key enabler for wider adoption of energy storage solutions.
In 2025, over 10 GW of storage capacity was installed across the European electricity system—more than double the amount in 2023. Germany and Italy lead the way, accounting for roughly half of this new capacity. Together with Poland, these three Member States are investing the most in adopting new battery technologies, with projects already in the pipeline potentially reaching 40 GW of total storage capacity.
Focusing on Italy, a report highlighted that large-scale battery storage systems discharged an average of 1.1 GW during the early evening hours (7:00 p.m.–8:00 p.m.) as of September 2025. While still a relatively small portion of overall demand—covering 3 percent compared to 52 percent from fossil sources—the potential for growth is significant. The realization of planned projects could increase battery capacity almost sixfold, meeting a larger share of peak demand and reducing the country’s dependence on expensive gas.
Calculations suggest that storing solar or wind energy in batteries and using it during evening hours in Italy could cost around €64/MWh—a competitive price compared to the average cost of gas-fired electricity production in Italy in 2025, which was €111/MWh and generally sets the price for electricity across EU markets.
Italy is well-positioned to follow the example of California, which began investing in battery storage several years ago. In 2021, California’s grid-scale battery storage capacity was around 2 GW—comparable to Italy’s current level. However, within four years, it jumped to 13 GW. If current projects come to fruition, Italy could follow a similar trajectory.
In 2025, California batteries regularly supplied almost a fifth of electricity demand during evening peaks, reducing the need for gas. In just four years, fossil fuels’ share of California’s evening peak demand fell from 44 percent in September 2021 to 34 percent in September 2025, while battery contribution increased from 3 percent to 22 percent. This suggests that EU countries implementing battery storage systems to store abundant clean energy could similarly reduce their reliance on gas.
