Agora: Splitting Germany's bidding zone would lower electricity prices and improve security of supply in Germany

According to a report by the Agora Energiewende think tank, creating several price zones in Germany instead of one large bidding zone could help lower electricity prices in the country and improve security of supply. Under such a system of local pricing nodes, most households and businesses would benefit from lower electricity prices, with the modeled price across Germany falling by an average of six euros per MWh in 2023, the report says.

Splitting the single German bidding zone into several zones would, according to a study by the think tank and the Fraunhofer Institute, save transmission system operators the costs of stabilizing the grid. These costs rose from EUR 1.3 billion to EUR 3.2 billion between 2019 and 2023 and could continue to increase in the coming years. At the same time, security of electricity supply in Germany would be strengthened.

“The German power system with a single bidding zone is currently blind to how the transmission grid is being used. To secure the future of the power system and avoid high costs, we need price signals that realistically reflect local generation and demand,” says Markus Steigenberger, executive director of the Agora Energiewende think tank.

The current system, in which generators can trade electricity freely with consumers across the country without having to consider whether sufficient transmission capacity is available to transport the electricity, fails to reflect bottlenecks in Germany's transmission grid.

These are found mainly between the north of the country, which has high levels of wind power generation, and demand centers in the south. Transmission system operators in Germany are therefore increasingly having to take costly measures to stabilize the grid.

Germany at the center of the ongoing EU bidding zone review

The likely new German coalition government has said in its coalition talks that it supports retaining a single bidding zone. The European Network of Transmission System Operators for Electricity, ENTSO-E, will publish its assessment of bidding zone configurations in Europe on 28 April as part of the so-called Bidding Zone Review.

This time, following a decision by the European regulator (ACER), the assessment focuses, among other things, on alternative configurations in Germany. In its study, transmission system operators will either recommend retaining the current configuration or changing it, based on predefined criteria.