Swedish Energy Minister Ebba Busch is still angry with the German federal government. Busch said on Monday on the sidelines of the energy ministers’ meeting in Brussels that she was “not surprised, but also not happy” about Berlin’s stance on wanting to maintain the uniform German-Luxembourg electricity price zone. From their point of view, the existing bottlenecks in the German electricity network too often lead to high prices in southern Sweden. But a few hours later, Federal Economics Minister Katherina Reiche (CDU) finally rejected calls for a division of the German electricity bidding zone. In a “Bidding Zone Action Plan” your company names a series of measures that are intended to reduce existing network bottlenecks within Germany. The transmission network will be “significantly further developed and strengthened” in the coming years, for example through the construction of large high-voltage transmission lines. Accordingly, for example, Ultranet should go into operation in 2026, A-Nord and Südostlink in 2027 and Südlink in 2028. In addition, planning and approval procedures have been accelerated and existing routes have been optimized and strengthened. The planned location of new gas power plants primarily in the south and the planned reform of network fees (“Agnes”) are also mentioned as measures to alleviate network bottlenecks. The latter could lead to network fees becoming more dynamic, meaning they could vary spatially and temporally in the future. However, the process is not in the hands of the Federal Ministry of Economics, but rather the Federal Network Agency. Currently, electricity always costs the same in Germany. The report now presented and sent to the EU Commission is an attempt to draw a line under the debate that has been brewing for a long time. At the end of April, the European transmission system operators (Entso-e) recommended dividing the German-Luxembourg electricity price zone into five zones, as this would bring welfare gains. However, parts of the methodology were subsequently criticized. The Ministry of Economic Affairs now argues that the welfare gains simulated by the operators are “many times lower” than the costs that would be associated with a reallocation of the bidding zone. Reiches Haus also fears regional cost differences for end consumers and the fact that locating generation plants in some regions may no longer be worthwhile in the future. However, many energy economists would welcome precisely these effects. Even today, the grid is often unable to transport the large amount of renewable electricity – also because the price on the electricity exchange is always the same for the whole of Germany, regardless of how valuable the electricity is in a particular location. The market is under the illusion that there is always enough capacity to transport electricity from A to B. In fact, this is often not the case, and production and consumption have to be adjusted subsequently – which is associated with costs. “Simply unimaginable” And the problem is likely to get even bigger in the future. Many believed that “we can simply move on with a liberalized electricity market, more flexibilities and increasingly liquid short-term trading. I’m afraid they are wrong,” wrote Lion Hirth from the Berlin Hertie School a few days ago on the “Linkedin” platform. “Either we will share the price zone – or we will get a whole series of instruments, rules and regulations that will increasingly restrict the dispatch of power plants, storage, renewables and flexible consumers.” “Dispatch” refers to the use of the respective technologies. It is “simply inconceivable” that “hundreds of gigawatts of wind and solar energy, dozens of gigawatts of large batteries and millions of electric cars react to intraday price signals in a matter of seconds and are completely blind to the network.” More on the topic The prominent expert commission for energy transition monitoring, consisting of Andreas Löschel, Veronika Grimm, Felix Matthes and Anke Weidlich, also had a division in their report presented last week advocated and cited “significantly” lower costs for congestion management and network expansion as well as more efficient local price signals as reasons. The EU Internal Electricity Market Regulation has actually stipulated since 2019 that network operators must provide at least 70 percent of the available transmission capacity for European electricity trading by the end of 2025. Germany has already done a lot to achieve this, the report says. However, it remains unclear whether the goal will actually be achieved by the end of the year.
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