Germany remains committed to a single power market in its area and doesn’t like the recommendation from a new report to split the market into five separate bidding zones.
Entso-e, the association of EU transmission system operators, released a report on Monday evaluating bidding zone configurations with the purpose of establishing “optimal bidding zone configurations in Europe to maximize economic efficiency and cross-zonal trading opportunities, while maintaining security of supply.”
For the Central Europe region, which includes the German power market, the simulation results showed that the split of the Germany–Luxembourg zone into five bidding zones would have the highest savings and economic efficiency.
Germany was quick to criticize the proposal, which is not binding, but if no agreement is reached, the bidding zones issue could be raised with the European Commission in six months’ time.
“We remain committed to the single German-Luxembourg electricity bidding zone,” a spokesperson for the German government told Bloomberg, commenting on the Entso-e’s report and its recommendations.
The report “systematically overestimates the positive effects of bidding zone splitting,” the spokesperson added, referring to the proposals and findings in the report.
Germany will decide how to proceed with this as the results aren’t legally binding, they noted.
Germany is a single bidding zone, where most industrial enterprises in the south can bid and access cheaper electricity from the north, which hosts most of Germany’s wind power plants. Germany’s government and industry are concerned that splitting the zone into smaller bidding zones would be a disadvantage to the energy costs for the industry, which is already burdened by high energy prices compared to the U.S. or China.
On the other hand, the large single bidding zone that includes Germany leads to volatile power prices in neighboring countries.
Early this year, lower-than-normal winds in Germany reduced wind power generation, boosting electricity prices and the reliance on fossil fuels. The low wind output affected regional prices as Germany’s utilities were also raising electricity imports from neighboring countries.
By Charles Kennedy for Oilprice.com
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