The new guest article was signed by the associations BDI, BDEW, VDA, VKU and VCI, as well as the most important German trade unions. “A division cannot be implemented at the push of a button, but would take several years,” it says. The associations point out that this would mean “considerable uncertainty instead of predictability” for energy suppliers and industry. “This leads to reluctance instead of urgently needed investments.”
There is currently a uniform price zone in Germany. This means that the price on the electricity exchange is always the same for the whole of Germany – regardless of where the electricity is generated or consumed. The system therefore acts as if the electricity grid always has sufficient capacity. In fact, this is not the case. Wind power from the north, for example, cannot always be transported to the consumption centers in the south. The grid operators then have to intervene, i.e. turn off offshore wind farms and start up gas-fired power plants in the south. This cost more than 3 billion euros last year – financed by electricity customers via grid fees.
This so-called redispatch repair “robs Germany of the efficiency and effectiveness of market-based price control,” argue the twelve energy economists, including Lion Hirth and Veronika Grimm. “The price of electricity on the stock exchange should be higher where there is currently high demand and low where there is currently an oversupply.” Batteries, electric cars and power-to-heat systems will soon be added to the existing problems, threatening to overload the grids.
Higher electricity prices in the south
The European regulatory authority ACER asked Germany some time ago to examine whether dividing the country into two or more bidding zones – for example north and south – could alleviate the problems. In the coming years, this could lead to a fundamental reform of the German electricity market design. Scandinavia and Italy already have several price zones. The joint German-Austrian bidding zone, which existed until 2018, has also been split up.
But Bavaria and Baden-Württemberg in particular are opposed to a division of the electricity market within Germany. This is because households and industry there would probably have to pay higher electricity prices. The associations also fear this and point to a “massive loss of industrial added value and good employment conditions”. Electricity prices in Germany are already a locational disadvantage in international comparison. If the price zones were to be separated, major new investments would be made elsewhere.
The economists, on the other hand, had argued that industry in northern and eastern Germany could benefit from the local green electricity surplus and thus lower prices: “Anyone who invests in hydrogen production, data centers or green steel factories in Mecklenburg today always pays the Germany-wide price, even if there is a regional surplus of electricity and the wind farm next door is throttled down. However, if politicians signal that they will switch to local prices in the future, investors will build in efficient locations.”
