Published by Global Banking and Finance Review
Posted on April 28, 2025
By Kate Abnett
BRUSSELS (Reuters) -Germany should consider splitting its electricity market into up to five price zones to better reflect the different costs across the country, Europe's association of power grid operators (ENTSO-E) said in a report on Monday.
WHY IT'S IMPORTANT
Germany is a single large power market zone, with a unified wholesale price. Luxembourg is also part of Germany's electricity bidding zone.
However, congestion on Germany's grid, which lacks connections to move power from the wind-rich north to consumption centres in the south, has increased calls for a split into at least two zones, to stop high prices in one region bleeding across the entire country.
BY THE NUMBERS
ENTSO-E said its analysis of various options for splitting Germany's market suggested all would yield economic benefits, but a split into five bidding zones would deliver the biggest benefits, of 339 million euros ($385 million) for 2025.
However, while splitting the market could yield lower prices in the renewables-rich north, ENTSO-E said prices could increase in southern regions - the seat of much of the heavy industry that drives the German economy.
WHAT'S NEXT
Germany's new coalition government has said it opposes splitting up the power market, which it fears could increase prices in the south and impact industrial activity.
However, the issue is already disrupting power infrastructure projects, and countries including Sweden are lobbying Berlin to reconsider.
CONTEXT
Sweden has said it will not green light a new power cable to connect the south of the country to Germany unless Berlin reorganises the German market.
Sweden and Germany are already connected by one power cable, which Sweden's government has said is driving up power prices in Sweden's south - despite being connected to northern Germany where cheap renewable energy is abundant. Sweden's electricity market is split into four zones.
($1 = 0.8804 euros)
(Reporting by Kate AbnettEditing by Mark Potter)
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