Energies 2022, 15, 7504. https://doi.org/10.3390/en15207504 www.mdpi.com/journal/energies Article The Anatomy of Unaffordable Electricity in Northern Europe in 2021 Jaakko Jääskeläinen 1, *, Kaisa Huhta 2 and Sanna Syri 1 1 Department of Mechanical Engineering, Aalto University, Konemiehentie 3, 02150 Espoo, Finland 2 Centre for Climate Change, Energy & Environmental Law, University of Eastern Finland Law School, Yliopistokatu 2, 80101 Joensuu, Finland * Correspondence: jaakko.j.jaaskelainen@aalto.fi Abstract: European electricity prices soared to unusually high levels during 2021, which exposed vulnerabilities in the economy and led to concerns about affordability. The concerns were further exacerbated in 2022, as Europe strove to cut its dependence on the Russian fossil fuel supply, as a result of the Russian invasion of Ukraine. This article explores the causes of the price increases in 2021 and assesses their likely future development by using Finland as a case example. We address a gap in the existing energy literature by elucidating the origins and future outlooks of price spikes in highly interconnected electricity markets. Based on an interdisciplinary combination of legal and qualitative data analysis, this study approaches its key objective in three stages. First, we describe the European market and its regulatory design to demonstrate the legislative framework and pre‐ conditions within which the market is expected to operate and how these rules connect to guaran‐ teeing the affordability of electricity. Second, we explore how these preconditions functioned in practice in 2021 by analysing the wider macro‐level trends that resulted in the elevated prices throughout Europe, particularly in Finland. Third, we assess the impacts of these trends on Finnish electricity price development. Based on these descriptive and predictive analyses, we show that the European market design fundamentally necessitates price variation to ensure market‐based invest‐ ment and energy security in the long‐term. Our analysis demonstrates that the high energy prices in 2021 were, in general, the result of various weather‐related, economic, and political factors. More‐ over, our findings indicate that the dynamics of price formation within a Member State are complex, and in the case of Finland, strongly impacted by neighbouring markets. Keywords: energy market analysis; energy security; energy policy; affordability; price peaks 1. Introduction 1.1. Research Objectives The year 2021 witnessed the compounding of multiple interlinked phenomena re‐ sulting in record‐high electricity wholesale prices throughout Europe. In comparison with the unusually low electricity prices in 2020, this increase in price was drastic: the average day‐ahead prices increased +218% in Germany, +239% in France, and +470% in the Nordic countries [1]. An increase of this magnitude led to bankruptcies [2,3], amplified inflation [4], and raised deep concern about the affordability of electricity, particularly for energy‐ intensive and cold countries such as Finland [5]. This trend has continued in 2022 as Eu‐ rope now strives to cut its dependence on Russian fossil fuel imports, leading to even higher energy prices, most likely to continue into spring 2023. It is in this context that we examine the anatomy of high energy prices in Northern Europe, using Finland as an il‐ lustrative case‐example of the dynamics of these price developments. From the perspective of the European electricity market, price variations with some‐ times even extremely high electricity prices are not necessarily unwelcome. In fact, Citation: Jääskeläinen, J.; Huhta, K.; Syri, S. The Anatomy of Unaffordable Electricity in Northern Europe in 2021. Energies 2022, 15, 7504. https://doi.org/10.3390/ en15207504 Academic Editors: Linas Martišauskas and Ričardas Krikštolaitis Received: 30 August 2022 Accepted: 26 September 2022 Published: 12 October 2022 Publisher’s Note: MDPI stays neu‐ tral with regard to jurisdictional claims in published maps and institu‐ tional affiliations. Copyright: © 2022 by the authors. Li‐ censee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and con‐ ditions of the Creative Commons At‐ tribution (CC BY) license (https://cre‐ ativecommons.org/licenses/by/4.0/).