EEX/EPEX Spot: Splitting German Power Market Increases Cost of Power Supply by up to EUR 100 Million per Year

A study carried out on behalf of the energy exchanges EEX and EPEX Spot comes the conclusion that a split of the German-Austrian power market into two bidding zones would increase the cost of power supply by up to EUR 100 million per year.

1. Main Findings

According to the exchanges

“A trade-off between costs is revealed: If the bidding zone is split, costs for redispatch can be reduced in some cases while continuous inefficiencies arise from uncertainties when determining total transmission capacities between the smaller zones. Comparing these two cost factors, the study shows that a split of the German-Austrian bidding zone would increase total cost of power supply by up to 100 million Euro per year. Additional factors such as loss of liquidity and substantial transaction costs would add to those inefficiencies.”

2. Background Information, Bavarian Opposition to Grid Expansion

EEX and EPEX Spot did not inform about the reasons for commissioning the study. It should be seen in connection with opposition in Bavaria to the construction of new HVDC power lines from Northern Germany to Bavaria (for more information, please see here).

According to the magazine Der Spiegel Vice-Cancellor and Energy Minister Sigmar Gabriel (Social Democrats) warned Bavaria’s conservative premier Horst Seehofer (CSU) that if Bavaria continued to oppose the power lines “one did not have to be a prophet to know that ultimately the EU would divide the uniform bidding zone for Germany into a cheaper one in the North and a more expansive one in the South”.

According to Der Spiegel a decision about the power lines was postponed until summer in yesterday’s meeting of the government.

Source: EEX

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