Northern states call for splitting German power price zone based on renewables capacity

An alliance of northern German states has called for a sweeping reform of the country’s power market to allow those in the north to pay lower prices due to their abundance of renewables. Northern states Schleswig-Holsten, Mecklenburg-Western Pomerania and Lower Saxony have suggested splitting Germany into different power price zones, whereby costs would be lowered for states with a high share of renewable power. Such a split would be “the logical consequence of the wrong track in energy policy” taken by governments in southern states, especially Bavaria, Tobias Goldschmidt, energy transition minister of Schleswig-Holstein, told newspaper Die Welt. Goldschmidt, who is from the Green Party, argued the conservative CSU in Bavaria has obstructed grid and renewables expansion for more than 15 years and people in the north “can no longer understand why they should be paying for that.” From an industrial policy perspective, “there needs to be honesty about the costs,” he argued. Lower Saxony’s energy minister Olaf Lies from the Social Democrats (SPD) said northern Germany “has been bearing the brunt of energy transition efforts, which is why I think it’s reasonable that these regions gain some benefits from this burden.” Northern German states produce a large share of the country's cheap renewable electricity, mostly due to the many wind farms. According to price comparison website Verivox, all three northern states currently pay more in grid fees than Bavaria. These fees are calculated by the density of population centres and industrial companies as well as the “integration costs” of renewables.

Bavaria’s state premier Markus Söder rejected the call and warned that such a move would mean “the end of Germany’s unitary economic order,” public broadcaster BR reported. The CSU politician argued that Bavaria already boasts the second highest share of renewables among all states thanks to its large solar power capacity and also transfers billions of euros to other states via Germany’s inter-state financial adjustment mechanism, the (Länderfinanzausgleich). “I don’t think it’s advisable to play off the south against the north,” Söder said, adding he would be open to conversations about energy prices once the financial adjustment mechanism is abolished.

Splitting Germany's power price zone has been debated for many years. The EU has also examined the possibility of different power price zones as a tool to smoothen Europe’s power market functioning, whereby regions that fail to remove grid bottlenecks by 2025 would turn into their own isolated price zones. The previous German government introduced an “action plan” to ramp up grid capacity, but construction of key transmission lines such as SüdLink – which is supposed to bring wind power from the north to the south – has stalled for years, partly due to opposition from Bavaria’s government.