Requirements for the electricity network in Germany increased in recent years due to the energy transition. The utilization of existing infrastructure applying so called congestion management becomes more important. Regional pricing might help to set the right incentives for generation companies. One option for regional price differentiation is splitting the market into multiple bidding zones with deviating electricity prices. Expectations for such a design include incentives for investments in power plants, more efficient power plant dispatch, increased system stability, integration of renewable energy sources, as well as liquid electricity markets. The result would be a more efficient and economic coordination of electricity supply and demand. So far, the German energy policy has taken a clear stand against regional pricing and favors the status quo of a single bidding zone. The model based scenario analysis and qualitative reasoning indicate that at this moment in time two bidding zones do not improve congestion management. The implementation of two bidding zones might even lead to lower market liquidity and market uncertainties. With an average difference of 1.70 Euro/MWh (less than five percent of wholesale prices), price effects between the northern and southern bidding zone are marginal. Also, the necessity for re-dispatch (alternating market results due to network congestion) does not decline significantly. In the current situation it therefore does not seem advisable to introduce two bidding zones in Germany. However, the implementation of farther reaching regional pricing (i. e. nodal pricing) for Germany as well as Europe should be examined.
|Translated title of the contribution||Energy Transition and Electricity Market Design: Two Bidding Zones are not a Solution for Germany|
|Place of Publication||Berlin, Germany|
|Number of pages||9|
|Publication status||Published - 2015|
- Congestion management
- Bidding zones