Split-up of German power price zones would make sense economically – researcher

The politically sensitive idea of splitting Germany into different power price zones could make sense from an economic point of view, economist Achim Wambach of research institute ZEW told newspaper Süddeutsche Zeitung. “In terms of increasing efficiency on power markets, creating several price zones has a lot to offer,” Wambach said. A plea by an alliance of northern German states to create different price zones based on the regions’ renewable power production capacity has caused a stir among German states, but researchers have debated the idea for years as a way of creating incentives for modernising the energy system and avoiding bottlenecks, Wambach said. “We cannot afford inefficiency,” the economist warned, adding that rising energy prices in the European energy crisis are only adding urgency to the matter. He said the concept of “nodal pricing,” in which an individual price may apply for each entry or exit point (network node), as exists in the U.S. and some European countries such as Sweden, would offer an efficient solution. However, a simpler solution would be to expand electricity grid capacity. “If the electricity can be transported throughout the grid without any problems, the price would be the same everywhere,” he said.

Germany’s northern coastal states have massively increased their wind power production capacity in recent years, but insufficient grid capacity often means turbines are turned off to shed load. Industrial centres in the southern states, on the other hand, have mostly sourced electricity from nuclear and coal plants and bet on gas plants to replace these after the planned phase-out at the end of 2022. However, Russia’s attack on Ukraine has put the idea of using cheap gas as “bridge” technology into question. Crucial power transmission lines connecting north and south Germany have been held up in administrative procedures for years.