Operators seek to split Germany's electricity bidding zone

Will we pay regional electricity prices in Germany in future? A recent study by the transmission system operator concludes that a reorganization of the bidding zones could bring financial benefits. For the study, the European Network of Transmission System Operators for Electricity (ENTSO-E) analyzed the electricity markets of Central and Northern Europe and then evaluated 14 different configurations of bidding zones. It proposes a reorganization of one of the two regions.

A bidding zone is an area in which buyers and sellers on the electricity market can trade electricity within a zone without having to pay attention to the transportation requirements of the electricity. The electricity price is the same within the bidding zone. These zones largely adhere to European national borders, with some exceptions: Germany and Luxembourg, for example, form one zone. Sweden, on the other hand, is divided into four such zones.

Wind turbines stand still when there is an oversupply of electricity

The problem is that when there is a lot of wind in northern Germany, the wind turbines feed a lot of electricity into the grid. However, the oversupply means that the wind turbines, which generate cheap electricity, have to be switched off because the electricity cannot be transported away. This is because there are no routes to transport the electricity, for example to the southern federal states where the major industrial consumers are based.

If the demand from industrial companies cannot be met, power plants have to be activated in the south to supply expensive electricity. The effect is that the price of electricity rises throughout Germany. ENTSO-E is therefore proposing to split the Germany-Luxembourg bidding zone. The Netherlands should also be reorganized accordingly. Dividing Germany-Luxembourg into five bidding zones would provide the highest economic efficiency of the configurations analyzed. Here, ENTSO-E sees a savings potential of 339 million euros compared to 2025. Other splits bring less, but still cost reductions of 251 million euros.

Splitting the Netherlands would save nine million euros. Alternative configurations in France and Italy, on the other hand, would have a negative impact on economic efficiency. Sweden should also retain its current split. All alternative configurations examined in the study were worse.

No panacea

A reorganization of the bidding zones does not solve all problems, said Lion Hirth, who teaches energy policy at the Hertie School Berlin and is Managing Director of the consulting firm Neon Neue Energieökonomik, in a briefing by the Science Media Center. Without this, however, he considers the energy transition to be difficult. This would mean holding on to large power plants for longer. The expansion of battery storage and regional producers of renewable energies would be slowed down. In the same briefing, Karsten Neuhoff, Head of the Climate Policy Department at the German Institute for Economic Research (DIW), said that he believes the savings potential is higher than ENTSO-E.

However, criticism has come from the German Association of Energy and Water Industries (BDEW) and the German Association of the Automotive Industry (VDA). In a joint statement, the two heads, Kerstin Andreae (BDEW) and Hildegard Müller (VDA), described a division of the German electricity market as "neither sensible nor proportionate". The idea of splitting the German electricity price zone is "economically unconvincing". The savings would be small and only short-term.

"In contrast, a division of the German electricity market into several price zones would lead to massive uncertainties for the industry and would also significantly cloud the investment climate for renewable energies," wrote Andreae and Müller, calling on the German government to "continue to strongly advocate the preservation of the single electricity bidding zone".

(wpl)