This article gives an overview over the debate on vertical unbundling of the electricity industry in Europe. It starts with the description of the evolution of the EU policy with regard to the vertical structure of the electricity industry. Then we present the theoretical and empirical arguments that support the European Commission's position of a relative strict unbundling of the networks from the other vertical stages of the industry. We discuss whether a vertical separation of retail and production in electricity might also be beneficial, and finally replicate the arguments of the proponents of a vertically integrated structure in the electricity industry. Finally we draw some conclusions for a consistent regulation of the vertical structure in the electricity industry.