Apr 29, 2025
Germany should think about dividing the power market.
Germany should think about dividing its electricity market into up to five price zones to better reflect the varying costs across the country, according to a report by Europe's power grid operators association (ENTSO-E) on Monday.
Currently, Germany operates as a single large power market zone with a unified wholesale price. However, congestion on its grid, which lacks connections to transport power from the wind-rich north to consumption areas in the south, has intensified calls for at least two zones to prevent high prices in one area from affecting the entire country.
ENTSO-E's analysis of various market-splitting options, which includes Luxembourg, indicated that all would bring economic benefits, with a division into five bidding zones projected to offer the largest advantages of 339 million euros ($385 million) by 2025.
Such a split could decrease prices in the north, where inexpensive renewable energy is plentiful, but might also raise prices in the south, home to much of Germany’s heavy industry, ENTSO-E noted.
This issue has disrupted infrastructure projects, as Sweden, which already has its electricity market divided into four zones, stated in June that it would not approve a new power cable linking the southern part of the country to Germany unless Berlin reorganizes its market.
EU countries have six months to respond to ENTSO-E's findings, and the European Commission can step in with a proposal regarding amendments to the bidding zones if member states fail to reach an agreement.
Germany's new coalition government has expressed opposition to splitting the power market, fearing it could raise prices in the south and affect industrial activity.
Germany’s main transmission operators—50hertz, Amprion, TenneT, and TransnetBW—supported this position on Monday, claiming that the study's conclusions were inadequate to justify splitting the German-Luxembourg bidding zone, and warned that a division would reduce market liquidity and increase costs.
They argued that the anticipated benefits were minimal compared to overall system costs and criticized the report for using outdated data that did not consider key future developments, such as new power lines and renewable energy expansion.
Currently, Germany operates as a single large power market zone with a unified wholesale price. However, congestion on its grid, which lacks connections to transport power from the wind-rich north to consumption areas in the south, has intensified calls for at least two zones to prevent high prices in one area from affecting the entire country.
ENTSO-E's analysis of various market-splitting options, which includes Luxembourg, indicated that all would bring economic benefits, with a division into five bidding zones projected to offer the largest advantages of 339 million euros ($385 million) by 2025.
Such a split could decrease prices in the north, where inexpensive renewable energy is plentiful, but might also raise prices in the south, home to much of Germany’s heavy industry, ENTSO-E noted.
This issue has disrupted infrastructure projects, as Sweden, which already has its electricity market divided into four zones, stated in June that it would not approve a new power cable linking the southern part of the country to Germany unless Berlin reorganizes its market.
EU countries have six months to respond to ENTSO-E's findings, and the European Commission can step in with a proposal regarding amendments to the bidding zones if member states fail to reach an agreement.
Germany's new coalition government has expressed opposition to splitting the power market, fearing it could raise prices in the south and affect industrial activity.
Germany’s main transmission operators—50hertz, Amprion, TenneT, and TransnetBW—supported this position on Monday, claiming that the study's conclusions were inadequate to justify splitting the German-Luxembourg bidding zone, and warned that a division would reduce market liquidity and increase costs.
They argued that the anticipated benefits were minimal compared to overall system costs and criticized the report for using outdated data that did not consider key future developments, such as new power lines and renewable energy expansion.