The implications of two German price zones in a european-wide context

Abstract

As German TSOs are faced with the threat of northsouth transmission line overloading, the option of a national bidding zone reconfiguration in the form of a separate northern and southern bidding zone is investigated. By imposing a limit on north-south transactions during market clearing, less redispatch actions are necessary afterwards, as such resulting in more efficient congestion management. However, through market coupling, a national bidding zone reconfiguration also has an impact on neighbouring electricity markets. This paper analyzes the altered interactions between electricity markets caused by the introduction of two German prices zones by means of a costminimizing dispatch model. Besides modifying the market outcome within Germany, this market design change also impacts consumers and producers in other European countries. Therefore, a national bidding zone reconfiguration should always be analyzed in a European wide context.

The Devil in the details: The factors determining the selection of intrazonal congestion management methods across Europe

“…Motivation for further branching: When a large zone, like a single national zone, has to be divided into smaller zones to manage intrazonal congestion, consumers from one zone situated in one part of the country may be subject to higher prices than consumers located in another zone, situated elsewhere in the country, creating distributional effects within a country and reducing the public acceptance. A case in point is Germany, where, despite evidence indicating the pertinence of splitting the single existing bidding zone into multiple smaller zones, political concerns have emerged as the key barrier to the new zones adoption [ [31] , [32] , [33] ]. To overcome resistance, it is possible to modify one or more market design elements to address the socio-political concerns without altering the newly defined bidding zones.…”

“…In a meshed network, like the Central-Western European, zonal reconfigurations will have spill-over effects in the neighboring areas. Authors [ 31 ] study the market-splitting of Germany into northern and southern areas and observe that the consumer welfare in the countries closely connected to wind generation abundant northern Germany increases, whereas the consumer surplus in the countries directly connected to the demand-intensive south decreases. Authors [ 65 ] also came to a similar conclusion after studying market-splitting in Germany.…”

A clustering approach to the definition of robust, operational and market efficient delineations for European bidding zones

“…On the other hand, less common approaches include methods that do not rely on clustering. In [16,17], the authors assess the techno-economic impacts of splitting the German bidding zone based on manually defined zone borders. Grimm et al [18] introduce a multilevel optimization problem to design zone configurations that maximize social welfare.…”

“…In particular, the evolution of generation costs is examined in [21,22], average zonal prices in [16,21], and the penetration of thermal and renewable resources in [10,16]. In addition, the impact of zone revision on volumes of cross-zonal exchanges is addressed in [17] and authors from [16,18] include an analysis of consumer surplus, congestion revenues and producer profits. Furthermore, few contributions discuss the robustness of zone revision benefits to system evolution dynamics, which can be done by integrating several time horizons or complementary sets of dispatch scenarios in the case study.…”

Uncertain bidding zone configurations: The role of expectations for transmission and generation capacity expansion

“…In Europe, the discussion about a reconfiguration of current bidding zones is ongoing, both in regulatory and academic spheres (e.g., Grimm et al 2019;Ambrosius et al 2018;ENTSO-E 2018;Bertsch et al 2017;Egerer et al 2016;Grimm et al 2016b;Plancke et al 2016;Trepper et al 2015;CMA 2015;Frontier Economics and Consentec 2011). This debate, though necessary, is a key source of structural regulatory uncertainty.…”