29/04/25
German participants argue against power zone split
London, 29 April (Argus) — German power market participants have spoken out
against dividing the German bidding zone, citing lower market liquidity and
investments in renewable energies. The statements come after European
transmission system operators (TSOs) association Entso-E yesterday published its
bidding zone review (BZR), which concluded that splitting Germany's bidding zone
into five would be the most "economically efficient". Germany's four TSOs argued
that a bidding zone split would restrict liquidity in the futures market and
could increase costs in the balancing market because fewer providers in smaller
markets would participate. Renewables operators would probably see lower
revenues, which could increase the need for subsidies, the TSOs said. And the
economic gains from a split — around 1pc of system costs in 2025 — are not
"meaningful". The TSOs also questioned the "suitability" of the study, citing
"outdated" data and an "incoherent" analysis period. They highlighted the fact
that the study compiled data from 2019, while the implementation of a split
would only be possible by 2030, meaning developments in the system — including
grid and renewables expansion — were not taken into account. Renewables
association BEE agreed, adding that the BZR ignored several "key aspects", such
as grid security, market efficiency, stability and the impact on the energy
transition. The association highlighted the importance of strong German market
liquidity, which enables "functioning" long-term power trading that is "crucial"
for all of Europe. Traders' association Energy Traders Germany concurred,
stating that a liquid market benefits consumers and businesses, as well as power
plant investors. And exchange EEX told Argus that investments in power plants,
which rely on "long-term framework conditions", would probably drop if the
bidding zone were split. In the event of a split, subsidies and other
compensation measures for industrial actors would probably need to be increased,
EEX added. "All in all, it would end up being more expensive," the exchange told
Argus . And chemical industry association VCI said reorganising the market would
open up a "mega construction site" that would drag on for many years and create
market uncertainty. A bidding zone split would make industrially strong regions
into "high-price zones", energy association BDEW and automotive association VDA
said, weakening competitiveness and prosperity. Instead of dividing the bidding
zone, the focus should be on accelerated expansion and digitalisation of grids,
they argued. The likely-incoming German government has pledged to stick to a
single bidding zone , while economic ministry BMWK last year also rejected a
bidding zone split , citing the complexity of the change, the risks to the
competitiveness of industry centres, and lower liquidity. Germany's changing
power system In the BZR, Entso-E advises assessing "the impact of the change of
key influencing factors between 2025 and a potential implementation date around
2030", including grid expansion, before reconfiguring bidding zones. Germany's
power mix in 2024 was much changed from 2019. In 2019, solar and wind output
made up just under a third of the mix at an average of 19GW. By 2024, their
share had risen to just under 46pc, with output averaging 23GW. And owing to the
government-mandated phase-out, nuclear generation's share of the mix fell to
zero by 2024 from just under 14pc in 2019, when Germany had 9.5GW installed
nuclear capacity, according to Fraunhofer ISE data. Meanwhile, the share of coal
and lignite-fired output dropped by around 2.6 and 3.9 respective percentage
points from 2019 to 6.3pc and 16.3pc in 2024. Around 2.8GW and 10.3GW of coal
and lignite-fired capacity, respectively, was taken off the open market in
2019-24 as part of the country's coal phase-out, according to data from grid
regulator Bnetza. But gas burn in 2024 was around 1GW up from 2019, climbing to
just over 12pc of the mix against 8.7pc five years earlier. And Germany's mix is
likely to become even more renewables-heavy in the following years as it is set
to phase out a further 6GW of dispatchable capacity by the start of 2030. The
coal and lignite phase-out deadline is set for 2038, although market
participants have recently called the date into question, owing largely to
delays to the long-awaited power plant strategy. Owing to rapid solar buildout,
solar generation in 2030 could average 16.2GW, according to Argus calculations.
This would be 9.2GW up from 2024. And while onshore wind expansion lags in
comparison, generation in 2030 could average 16.6GW, which would be around 4GW
up from last year. German grid expansion is progressing rapidly, with 1,400km of
power lines approved last year, a record. The four main projects aiming to
address poor north-south interconnectivity — namely the 4GW Suedlink, 4GW
Suedostlink, 2GW A-Nord and 2GW Ultranet lines — are set to come on line between
the end of 2026 and 2030. German demand in 2024 was around 4GW lower than in
2019, largely owing to slowing production in energy-intensive industries, which
has declined since December 2021. Recent US tariffs on imports have triggered
further economic insecurity in industry, while BMWK earlier this month said it
expects industrial activity in the coming months to "weaken". While economic
growth is expected to increase by 1pc next year, according to BMWK, demand is
unlikely to recover to pre-Covid and pre-energy crisis levels unless conditions
improve for energy-intensive industries. By John Horstmann and Bea Leverett DE
power mix 2019 % DE power mix 2024 % Send comments and request more information
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