Price Contagion and Political Backlash: The Distributive Politics of European Electricity Grid Integration

Russia's invasion of Ukraine intensified EU calls for electricity grid interconnection to reduce geopolitical vulnerability and facilitate renewable integration. Yet countries increasingly resist deepening integration, paradoxically prioritizing self-sufficiency despite potential benefits for price stability and system security. We explain this puzzle through Schelkle's framework of implicit solidarity and Rodrik's compensation theory, arguing that grid integration creates unacknowledged distributive costs. While integration enhances external resilience, it generates internal frictions by harmonizing prices, pressure on domestic energy mixes, and incumbents while reducing state autonomy. It is hypothesized that this is triggering political mobilization that institutions cannot accommodate, most notably increased Euroscepticism and distrust in markets and in the domestic government. Furthermore, we expect it will likely get worse with extended integration and the expansion of renewable energy, due to increased price volatility and challenges to system security. The paper examines this politicization through Norway's NordLink interconnector, the most prominent case of interconnector-induced redistribution and political backlash. Commissioned in 2021, NordLink produced a 26-fold surge in southern Norwegian electricity prices by 2024, catalyzing an unprecedented political crisis. The Centre Party withdrew from government in January 2025, specifically demanding renegotiation of the interconnector to halt "price contagion" from European markets. Regional variation reveals the mechanism of politicization: price zones directly connected to Europe experienced far greater mobilization than insulated northern regions. Survey analysis (2019-2025) based on the ESS and the Norwegian Citizens’ Panel. We exploit these exogenous price shocks in a design that leverages this natural experiment by comparing affected and unaffected regions; discourse analysis based on the Norwegian Parliamentary Debates Dataset examines qualitatively how political actors framed integration as a threat to Norwegian sovereignty and welfare. The findings reveal a political economy paradox: the geopolitical imperatives driving integration simultaneously generate distributive conflicts that current EU regulations cannot accommodate. EU rules mandate open capacity allocation while prohibiting compensatory instruments, making it difficult for governments to negotiate burden-sharing arrangements with domestic constituencies in response to transnational risks. This creates a situation where integration fails not because it lacks technical or economic justification, but because redistributive issues stemming from interconnection are increasingly visible for countries and citizens due to geopolitical supply shocks. Addressing this requires moving beyond regulatory harmonization to deliberate redistributive schemes based on a clear recognition of the beneficiaries of trade, making bargaining over compensatory mechanisms possible within the EU and across member states. Without such mechanisms, countries will continue to reject grid interconnection despite recognizing its geopolitical necessity and its importance for the green transition.