Two Price Zones for the German Electricity Market: Market Implications and Distributional Effects

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe discuss the implications of two price zones, i.e. one northern and southern bidding area, on the German electricity market. In the northern zone, continuous capacity additions with low variable costs cause large regional supply surpluses in the market dispatch while conventional capacity decreases in the southern zone.As the spatial imbalance of supply and load is increasing, the current single bidding area results more often in technically infeasible market results requiring curative congestion management.There is an ongoing discussion about the potential effects of introducing bidding zones in Germany. Using a line sharp electricity sector model, this paper analyzes the system implications and the distributional effects of two bidding zones in the German electricity system in 2012 and 2015, respectively. Results show a modest decrease in cross-zonal re-dispatch levels, in particular in 2015. However, overall network congestion and re-dispatch levels increase in 2015 and also remain high for both bidding zones. Results are very sensitive to additional line investments illustrating the challenge to define stable price zones in a dynamic setting. With two bidding areas, prices in the model results increase in the southern zone and decrease in the northern zone. The average price deviation grows from 0.4 EUR/MWh in 2012 to 1.7 EUR/MWh in 2015 with absolute values being significantly higher in hours with price differences. Stakeholders within zones are exposed to the price deviations to a different extent. Distributional effects are surprisingly small compared to the wholesale price or different network charges.

Impacts of renewables generation and demand patterns on net transfer capacity: implications for effectiveness of market splitting in Germany

“…[16,32,33] or [34]). However, this paper does not aim at finding the optimal delimitation of alternative bidding zones, but rather aims at analysing the impacts of RES generation and demand patterns on NTCs for a fictitious yet appropriate splitting of the German power market and the resulting implications for market splitting in a power system with a high share of RES.…”

“…So far, few studies have addressed the market implications and distributional effects of market splitting in Germany (compare [5,34,35]). Accordingly, the introduction of further bidding zones in Germany would affect the spot market results.…”

“…Thus, when the NTC becomes binding spot prices are higher in the South. In [34], the average annual electricity price differential is 1.70 €/MWh (2015). In [5], an average annual price difference of 1.40 €/MWh (2020) is found.…”

“…In [34], Egerer et al recommend further research on different approaches to regional pricing. Moreover, Trepper et al [5] conclude that a balanced choice between zonal pricing with additional bidding zones in Germany and grid extension is needed to guarantee system security.…”

Coordinating Cross-Country Congestion Management

“…These inter-dependencies highlight the relevance of international cooperation and call for coordinated measures of congestion management. In principle, the delineation of bidding zones, in which the network topology is economically not taken into account, can internalize congestion issues (for an analysis of the German case, see Egerer et al, 2015), with the limiting 3 case of nodal pricing. Irrespective of market areas, however, coordination issues between countries or zones remain to be resolved.…”