From Fuel Dependence to Network Dependence: Cross-Border Electricity Interdependence and Strategic Vulnerability in Europe's Energy Transition

José Alves and João Estevão

No 12836, CESifo Working Paper Series from CESifo

Abstract: Europe’s energy geopolitics is usually told as a story of changing suppliers – Russian gas yesterday, Chinese clean technology tomorrow. Electrification adds a second, more local geopolitics, defined by who sits at the centre of the grid, who runs into bottlenecks, and who can call on flexibility when stress hits. Using public data alone, we build a bidding-zone-month panel covering 41 European zones over 2019-2025 and test six pre-stated hypotheses about how this internal layer redistributes price volatility, negative-price exposure, net imports, and cross-border price gaps. Three findings survive our identification checks. More cross-zonal capacity lowers net imports in average months, confirmed quasi-experimentally around the NordLink and Viking Link HVDC commissionings. Higher renewable shares raise within-month price volatility once network position is held fixed – about 1.8 EUR/MWh per ten percentage points of renewable share – concentrated in the network-central half of the panel. And the 2022 gas crisis widened the gap between EU-27 and non-EU European zones: integration transmitted the shock into the most-connected jurisdictions instead of dampening it. The flexibility-moderation prediction fails. Energy sovereignty in an electrified Europe is best understood as advantageous positioning within regional infrastructure, not separation from it; integration is double-edged.

Keywords: electricity interdependence; energy transition; strategic vulnerability; congestion; Europe; energy security (search for similar items in EconPapers)
JEL-codes: C33 D85 F52 Q41 (search for similar items in EconPapers)
Date: 2026
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