Filenews 2 November 2025 - by Andreas Poullikkas
The electricity market is experiencing its biggest transformation in decades, with active customers emerging as the dominant driver of electricity price reductions across Europe.
From Spain to Germany and from Finland to Portugal, increasing consumer participation in renewable energy production is creating a revolution in the way prices are formed.
Active customers are consumers who are not just limited to buying electricity, but generate, store and manage their energy. Through photovoltaic systems, small wind turbines, storage systems, and smart applications, they are transforming from passive recipients into active market participants. This transition from traditional consumers to modern "prosumers" (producers and consumers) is the driving force behind the reduction of electricity prices.
The "merit order effect"
The power that allows active customers to influence prices is due to the "merit order effect". In modern electricity markets, power stations are ranked based on their operating costs, with the cheapest ones being put into operation first. The renewable energy produced by active customers has almost zero marginal costs, since it does not need fuel or extensive labour to operate it. This means that solar and wind power are placed at the top of the utilization range, displacing more expensive plants, which use natural gas, coal or other fuels.
The magnitude of the economic impact from active customers becomes clear when we look at comparative data from various markets. In U.S. markets, the development of wind and solar power reduced average wholesale prices by less than $1.3 per megawatt hour (0.13 cents per kilowatt). California is an exception, where solar energy growth has driven down prices by $2.2 per megawatt hour (0.22 cents per kilowatt), perhaps predicting a greater impact than solar power in other regions as its penetration rates increase.
However, the influence of active customers is not limited to simply lowering average prices. Pricing patterns by location, time of day, and season are also fundamentally changing. Active customers' photovoltaic systems mainly produce during midday hours, drastically reducing prices during these hours. Similarly, wind systems may generate more energy during night-time hours, impacting off-peak tariffs.
The challenges for the system
Despite the obvious success of active customers in lowering prices, there are also significant technical and regulatory challenges. The variability of renewable generation creates new complexities for grid management.
When active customers generate more energy than they consume, reverse power flows can materially impact voltage levels and distribution network infrastructure.
These reverse flows require significant investments in networked computing technologies and monitoring systems to ensure the stability and security of the electrical system. At the same time, the extreme fluctuation of solar and wind generation poses technical challenges, necessitating predictive capabilities and dynamic control systems.
The above challenges are addressed through a strong regulatory framework, which supports the transition towards a more decentralized energy structure. The EU's RED IV (Renewable Energy Directive) actively promotes the development of energy communities and consumer ownership in energy decisions. The Directive provides for rights that allow citizens to participate in the energy transition, strengthening the position of active customers. In addition, the Energy Communities Regulations adopted by the EU, regulate the operation and governance of such communities, ensuring that small producers can organize and act collectively with legal protection. These regulatory frameworks create a solid foundation for managing technical issues and ensure that the progression towards active customers is orderly and efficient.
Technological advancements further enhance the influence of active customers on prices. Energy storage systems (e.g., batteries) allow active customers to store excess energy during low-demand hours and use it when prices are higher.
This creates a physical balancing mechanism that tends to reduce extreme price fluctuations and at the same time provides the ability to dynamically regulate reverse power flows. Intelligent management systems enable active customers to respond in real-time to market signals, maximizing the economic value of their energy while contributing to grid stability.
The collective action of active customers through energy communities and collective self-consumption programs further amplifies their impact on prices. When many small producers coordinate their production and consumption, they create a collective volume that can exert a significant influence on the local market. This is particularly evident in areas with a high density of PV systems, where coordinated production during midday hours can lead to significant reductions in local prices.
Cheaper technology
The active customer revolution is expected to intensify in the coming years. The cost of clean energy technologies such as wind, solar, and battery storage is expected to fall further by 2-11% in 2026. In the long term, the cost of these technologies is expected to fall by 22-49% by 2035.
This continuous cost reduction will make the installation of renewable energy systems even more affordable for consumers, accelerating their transition to active customers.
The influence of active customers on electricity prices reflects a broader change in the nature of energy markets. From a system where prices were set by a few large producers, we are moving to a decentralized model where millions of small producers-consumers collectively shape the market. This change is particularly evident in the completion of the EU's internal electricity market, a market characterised by the freedom of movement of electricity, common operating standards and enhanced interconnections between national systems.
Active customers are not only becoming part of this internal market, but are now crucial players in the European energy transition, tapping into the potential for competition, opportunities to sell surplus energy and the benefits of European cross-border transactions. The strengthening and expansion of electrical interconnections at European level allows for the sharing of renewable energy and the optimisation of the system, increasing overall security of supply and further reducing prices.
This change not only affects prices, but redefines the relationship between consumers and suppliers, creating a more democratic and participatory energy system where every consumer has the opportunity to be part of the solution for cleaner and cheaper energy.
* Professor of Energy Systems / Frederick University
