Marginal Pricing and the “Merit Order”

Commissioned by Eurelectric

Publication date: 06.03.2026

The policy debate about electricity market design, marginal pricing, and the “Merit Order” has resurfaced in Europe. Policymakers and stakeholders con-cerned about electricity prices have proposed state interventions into wholesale electricity markets. These interventions resemble the “Iberian Mechanism” (gas subsidy) and Prof. Pantelis Capros’ proposal for a market split, both of which were suggested during the energy crisis.

This memorandum presents data on electricity price levels, explains the mechanics and merits of marginal pricing, and evaluates the pro-posed interventions.

Here you can find the explainer.