Citation: Halkos, G.E.; Tsirivis, A.S. Electricity Prices in the European Union Region: The Role of Renewable Energy Sources, Key Economic Factors and Market Liberalization. Energies 2023, 16, 2540. https://doi.org/10.3390/en16062540 Academic Editor: Seung-Hoon Yoo Received: 30 January 2023 Revised: 16 February 2023 Accepted: 3 March 2023 Published: 8 March 2023 Copyright: © 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). energies Article Electricity Prices in the European Union Region: The Role of Renewable Energy Sources, Key Economic Factors and Market Liberalization George E. Halkos * and Apostolos S. Tsirivis Departmentof Economics, University of Thessaly, 38333 Volos, Greece * Correspondence: halkos@econ.uth.gr; Tel.: +30-2421074920 Abstract: Electricity is by far the most valuable energy commodity for households; hence, it is of the utmost importance for national regulatory authorities and the European Commission (EC) to guarantee affordable and unimpeded access for European citizens to this vital social good. The existing academic literature mainly focuses on the effect of specific renewable energy resources (RES), such as solar, wind, etc., on electricity prices, thus neglecting the crucial impact of the electricity market structure. In an effort to fill this gap, the present paper attempts to clarify whether the real effect of the share of total renewable energy production in the generation scheme and certain electricity market liberalization indices constitute key determinants of household electricity prices. The study is further innovative on the grounds that the empirical analysis utilizes both static and dynamic panel methodologies for a dataset including several variables introduced for the first time in academia. The dataset consists of yearly observations regarding 26 EU countries for a time horizon from 2003 until 2019. The econometric outcomes revealed the complex relationship between RES deployment and generation concentration with the level of household electricity prices. In contrast, the deregulation of the retail market and especially the presence of many retailers with a market share exceeding 5% can benefit European consumers by reducing electricity prices. Additionally, the relative costs concerning the outward-orientation of the economy and the power system’s upgrade were found to be transferred to the final electricity price. The opposite applies to environmental taxes, allowing European governments to accumulate considerable funds for ecological and environmental protection actions. Lastly, due to the estimated slow adjustment rate of electricity prices, policymakers are advised to develop long-term strategic energy planning. Keywords: electricity price; renewables; market liberalization; competition; SDG 7; energy policy; JEL classifications 1. Introduction Electricity is an essential energy commodity both for households and the industrial sector. The quality of life and economic prosperity of millions of people depend to a high degree on their ability to uninterruptedly access an affordable and high-quality power grid. The backwash from the recent military conflict and escalating geopolitical tension in Eastern-Europe shone a spotlight on the European Union’s (EU) high dependency on imported fossil fuels to ensure the security of the electricity supply [1]. The entire European economy, governments, and citizens were suddenly exposed to potential energy shortages and extreme price risks. This development highlighted more than ever the importance of enhancing energy resource autonomy while, in parallel, eliminating any current market distortions that delay the transition towards a deregulated electricity market. The EU was one of the leading forces in incorporating the United Nations’ (UN) sustainability goals for low-cost and clean energy production (SDG 7), which intended to mobilize countries on a global scale to take precautionary measures against the phe- nomenon of climate change and energy poverty. Since 2015, when the UN first endorsed Energies 2023, 16, 2540. https://doi.org/10.3390/en16062540 https://www.mdpi.com/journal/energies