Germany Prepares For EU Electricity Bidding Zones Battle

Germany Prepares For EU Electricity Bidding Zones Battle

Discussions about Germany's electricity market are intensifying. The grid operators will release an important report soon. Brussels may divide the country's wholesale market bidding zone, causing concern.

Everyone in Germany pays the same electricity price. The price doesn't change based on where you live. This is true even if you live in the north where they use wind power or the south where they rely on coal.

Things are starting to change. France has only one price for household electricity, but other big European countries like Italy and Sweden charge depending on where you live.

When pricing zones are smaller, it's better for the economy. This is because they reflect the local conditions, like how much power can be produced or the grid's infrastructure.

Take Bavaria as an example. They need lots of energy but don't like wind farms and power lines there. So, they get their wind power from the north of the country. This makes the grid busy and means some energy gets lost when it's transferred. Everyone in Germany has to pay for this extra cost.

Germany is in the middle of Europe. This makes the EU look at them closely. Germany has a smaller grid than its neighbors. This causes problems with other EU countries.

Lots of people in the South of Germany are using a lot of electricity. The electricity needs are bigger than what they can produce in Germany. So they started sending some electricity through Poland. But this caused problems for Poland too. Poland couldn't send electricity to other places like Czechia because they were busy helping Germany.

ACER proposed to create multiple bidding zones for Germany's wholesale market, challenging the political consensus. The proposal was made by the EU's energy regulatory agency last year.

In late 2022, the north of Germany, where a lot of the country's wind power is set up, tried to break up the German electricity market because of the ACER proposal.

Olaf Lies, former energy minister of Lower Saxony, said that when you live where energy is produced, energy should be cheaper there too.

Reinhard Meyer supported Lies. Meyer is from Mecklenburg-Vorpommern, a small northern state. Meyer said electricity grid fees hurt consumers and harm businesses in northern Germany.

They are both members of the SPD party. Chancellor Olaf Scholz is also from Hamburg.

The southern German states came together and made a statement. They want the electricity price to be the same for everyone. They think this is important for the German economy. These states are Bavaria, Baden-Württemberg, Hesse, Saarland, Rhineland-Palatinate, and North Rhine-Westphalia.

The southern states think bigger markets are better. This makes it easier to buy and sell things. Bavaria says they give €9 billion to poor states every year.

Berlin Talks End With No Deal

The Vice-Chancellor of Berlin, Robert Habeck, doesn't want to get involved in energy issues. He's in charge of the ministry that handles the economy and climate action.

Habeck said making a new bidding zone isn't important right now. The ministry said they won't discuss splitting the bidding zone.

The Green party led by Habeck is divided. The SPD didn't comment on this issue.

The FDP likes the idea of splitting up. But they're not as important in the government's coalition of three parties. Michael Kruse, who speaks for the FDP about energy, says it's important to use prices to make electricity cheaper for people and make the electricity grid work better. A single price zone won't do this enough in all of Germany.

The Greens and FDP have a common point. They both want to fix things quickly. They suggest adapting grid fees. The amount would depend on how connected the region is and how much power it generates.

Habeck's ministry for economy and climate action made a report about a workshop. The report says that the government will give proposals on how to distribute energy transition costs more fairly. Consumers pay more grid fees in areas with more renewable energy, according to the report. The FDP party will likely support this idea.

Germany is unsure about changing electricity prices. People are waiting for a report from the four grid operators. This report will come out next year.

By spring 2024, four grid operators - TenneT, 50 Hertz, TransnetBW, and Amprion - will make a report. The report will look at ACER's suggestion to divide the German bidding area. The EU agency proposed the split.

The German grid operators made a report with their central European counterparts. The governments of neighbouring countries will examine the report. They have six months to decide if there will be changes. The countries include Austria, Belgium, Croatia, Czechia, France, Hungary, the Netherlands, Poland, Romania, Slovakia, and Slovenia. Luxembourg is part of the German bidding zone.

If countries can't agree, Commission will decide within six months. Commission will consult ACER before making a decision. Commission can change or keep bidding zone configuration. This is a last resort measure.

The 2019 electricity regulation gives the EU power to fix long-term congestion. This will improve economic efficiency and electricity trading between zones.

Holger Schneidewindt, an energy law expert at the consumer protection authority of North Rhine-Westphalia, says there should have been two price zones in Germany a long time ago. But the EU Commission isn't strong enough politically to make it happen.

The new European Commission that comes after the 2024 EU elections will take responsibility for any intervention from Brussels.

Berlin doesn't want the European Commission to get involved in the way electricity is bought and sold. They don't want any changes to how things have been working for a long time.

The Green party's spokesperson on energy policy, Ingrid Nestle, says Europe can't make the decision alone about how to divide the German electricity price zone.

Officials in Brussels can't predict the outcome of the bid zone review.

The European Commission has divided a bidding zone before. Austria became its own pricing area in 2018, after much pressure.

Making Germany or France divide would be challenging politically.

An energy insider in Brussels said that the Commission would be brave to do this.

Frédéric Simon and Alice Taylor made edits to the blog section.

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