Welcome to the first summer edition of our newsletter. With August upon us, this issue takes a different shape. Instead of the week’s developments, we look back at the first eight months of 2026 and at how this year’s events have shaped Europe’s energy transition, through the lens of our research.
The year began with questions around energy security, affordability and competitiveness. Then the crisis in the Middle East became a stress test for the European energy system. Across our research, three main themes emerged: new forms of gas dependence, the wider costs of exposure to volatile gas markets, and the importance of investing in infrastructure and proven alternatives that reduce that exposure.
Swapping one dependency for another
The EU has strengthened its energy security by cutting gas demand by over 20% between 2021 and 2024 and curbing gas imports from Russia. However, we warned in January that this progress masks a new vulnerability for the EU: Growing reliance on imports of US liquefied natural gas (LNG) risks creating another geopolitical dependency.
That research found that if the EU fulfils all its supply deals for US LNG and its gas demand reduction efforts falter, the bloc could source as much as 75–80% of its LNG imports from the US in 2030, up from 57% in 2025.
By May, our European LNG Tracker showed the trend accelerating. Given the ongoing disruptions to Qatari LNG exports, we projected that the US will overtake Norway to become Europe’s largest gas supplier in 2026 and could account for 80% of EU LNG imports by 2028. On average, US LNG is the most expensive for European buyers.
Meanwhile, despite curbing imports of Russian pipeline gas, Europe has continued to increase its reliance on Russian LNG this year.
“Europe’s shift from pipeline gas to LNG was meant to provide security of supply and diversification. Yet disruptions caused by the war in the Middle East and an overreliance on US LNG show that Europe’s plan has failed on both counts,” said Ana Maria Jaller-Makarewicz, lead energy analyst, Europe, at IEEFA.
Gas dependence is also an electricity story
For European consumers, the Middle East crisis is not only about gas. Our April analysis showed how gas power plants have a disproportionate influence on electricity prices across the EU.
Front-month gas prices on the Title Transfer Facility (TTF) — the European benchmark gas trading hub — fluctuated from around €20–30 per megawatt-hour (MWh) to peaks of €60–70/MWh or higher during periods of geopolitical tension in March and April 2026. This led to day-ahead electricity prices exceeding €120–150/MWh in markets such as Italy and Germany. This reflects how frequently gas sets the marginal price in these countries, amplifying the transmission of gas price shocks into power prices.
In the same period, electricity prices remained closer to €60–80/MWh in France, where nuclear dominates generation. In Spain and Portugal, renewables now account for more than half of annual generation, limiting the periods in which gas sets electricity prices.
In June, we estimated that a 60% rise in wholesale electricity prices above pre-February 2026 levels could increase European household electricity bills by up to €120 a year. Households in Italy are the most exposed in Europe to electricity bill increases because gas dominates power price formation.
But the costs of gas dependence extend beyond energy bills. Repeated LNG price swings can feed into inflation, slower growth and wider economic disruption, while the headline gas price captures only part of the cost of securing supply. Infrastructure, shipping, insurance and security costs are being absorbed elsewhere across the energy system and wider economy.
And when supply is disrupted, our work on energy shocks and systemic risk shows how the resulting economic impact can spread further, affecting asset prices, lending and investment conditions. The relevant question is therefore not only the price of LNG at a given moment, but the wider system cost of delivering it securely and absorbing the consequences when supply is disrupted.
Germany as a test case
Our two-part Germany series examined the risks at the core of the country’s energy transition. The first report found that Germany’s household heat pump installations from 2022 to 2025 saved the country €1.3 billion on LNG imports in the three years between 2023 and 2025.
Germany plans to decarbonise gas power plants by relying on hydrogen-fired generation. IEEFA estimates that if the country rapidly scales up technologies such as renewables, battery storage and cross-border grid connections, it could generate just 5% of its electricity from natural gas and hydrogen combined by 2045.
The second report revealed that Germany’s hydrogen demand is likely to fall short of official projections, risking costly overbuilding of infrastructure. Failure to meet optimistic hydrogen demand projections could require around €45 billion in additional public funding — roughly €1,000 per German taxpayer.
However, policy is expanding to prop up faltering demand. A recent shift away from renewable-based hydrogen towards natural gas-based hydrogen with carbon capture could prolong Germany’s exposure to volatile gas markets, threatening energy security and long-term industrial competitiveness.
Beyond Germany, Europe’s potential carbon capture and storage (CCS) project pipeline is losing steam. Our June analysis revealed that the volume of carbon capture capacity cancelled in Europe in 2025 exceeded that reaching final investment decision. Given the technical and economic challenges facing CCS as a decarbonisation option, a recovery in Europe’s CCS pipeline looks unlikely any time soon.
The transition depends on infrastructure and finance
Reducing these risks ultimately means investing in alternatives that reduce exposure to volatile fossil fuel markets and ensuring that finance reaches the infrastructure needed to deliver those solutions.
Our February research revealed how the European Green Bond Standard has provided a capital market funding channel for activities aligned with EU environmental objectives, which in turn support energy security and competitiveness.
Yet as energy transition-related investments accelerate, the standard captures only a small fraction of reported taxonomy-aligned investment thus far, signalling significant room for growth.
Italian electricity grid operator Terna is among the companies that have issued debt under the European Green Bond Standard, attracting strong investor demand. We found that the company’s planned grid investments can boost Italy’s energy security and competitiveness while accelerating the integration of renewable energy. Terna plans €16.6 billion of capital expenditure over 2024–28. We estimated that the company can make these investments without needing to materially raise electricity bills.
That is the story of 2026 so far. We will turn to what lies ahead in our next issue. Click here to find all IEEFA Europe research.