Southern regions are grappling with rising energy costs
Germany's energy market is at the centre of a heated debate, with proposals to divide the country into five electricity price zones gaining traction. This divisive move is aimed at improving market efficiency and sending more accurate price signals, but concerns about economic harm and industrial policy setbacks persist.
The ZEW in Mannheim, a renowned research institution, and Entso-E, an association of European transmission system operators, are among the supporters of this proposal. They argue that the current system, with a uniform electricity price, lacks a price signal that brings supply and demand into local balance. This is particularly evident in the transmission constraints from the wind-power-rich north to the consumption-heavy south, leading to overloads on windy days and increased electricity prices.
However, the previous federal government and the planned black-red coalition have rejected the division of Germany into several price zones, citing potential cost increases for economic locations in the south and west. Economic Minister Nicole Hoffmeister-Kraut (CDU) supports maintaining the uniform electricity bidding zone to prevent rising electricity prices and further uncertainties.
The Baden-Württemberg Chamber of Industry and Commerce shares similar sentiments. They fear that electricity price zones could create uncertainties for investments in the expansion of renewable energies and flexibilities. The economy in Baden-Württemberg warns against splitting Germany into multiple electricity price zones, as it would result in a significant competitive disadvantage for companies.
Resistance to the proposal also comes from Bavaria, Hesse, North Rhine-Westphalia, Rhineland-Palatinate, and Saarland, as they fear a weakening of their own economies. The UBW entrepreneurs' association predicts that electricity prices in the industry-rich south would rise significantly, while they would fall in the north.
Opponents of the proposal, such as Werner Götz, the CEO of Transnet BW, raise concerns about the significant costs of implementation. Götz suggests accelerated network expansion as a more effective solution.
Achim Wambach, the President of the ZEW, states that Germany is currently a brake on the development of the European electricity system. He argues that regional price zones could solve the fundamental problems of the German energy market, preventing congestion issues and optimizing the electricity flow and investment incentives.
The arguments for dividing Germany into five electricity price zones centre around improving market efficiency by better reflecting grid bottlenecks and sending more accurate price signals. However, critics warn that splitting the price zone could send devastating industrial signals, potentially increasing electricity costs in the south and harming economic competitiveness.
As the debate continues, it's clear that the future of Germany's energy market hangs in the balance. For further information, you can contact Wolfgang Leja at w.leja@your website.
- The proposal to divide Germany into five electricity price zones is supported by the ZEW in Mannheim and Entso-E, as they believe the current uniform electricity price lacks a price signal that brings supply and demand into local balance.
- Economy Minister Nicole Hoffmeister-Kraut (CDU) and the Baden-Württemberg Chamber of Industry and Commerce are among the critics, as they fear electricity price zones could create uncertainties for investments in renewable energies and flexibilities.
- Opponents of the proposal, such as Werner Götz, the CEO of Transnet BW, raise concerns about the significant costs of implementation, and suggest accelerated network expansion as a more effective solution.
- Achim Wambach, the President of the ZEW, argues that regional price zones could solve the fundamental problems of the German energy market, preventing congestion issues and optimizing the electricity flow and investment incentives, but critics warn that splitting the price zone could send devastating industrial signals, potentially increasing electricity costs in the south and harming economic competitiveness.
