Government persists in maintaining a single, consistent pricing structure for electricity - Federal authorities plan to keep a unified pricing system for electricity nationwide.
In a recent development, several German politicians, including Peter Tschentscher (SPD) from Hamburg, Daniel Günther (CDU) from Schleswig-Holstein, Andreas Bovenschulte (SPD) from Bremen, and Dietmar Woidke (SPD) from Brandenburg, have put forth a proposal for smaller electricity price zones in the country [1]. This call is not the first of its kind in Germany, as the idea has been floated before [2].
Currently, Germany operates under a unified electricity price zone, with the price determined by the cheapest electricity production, often wind energy from the northern states [3]. However, the proposed smaller zones aim to eliminate costs associated with insufficient transmission network capacity, as well as allowing supply and demand to adapt locally [1].
One of the key reasons for maintaining the unified price zone is grid integration and stability. Germany’s extensive transmission network, spanning around 37,000 km, connects all federal states, allowing electricity to flow freely across regions. This enables balancing variable renewable energy supply nationwide, preventing localized price spikes or shortages due to regional fluctuations [2].
Another reason is simplification and market efficiency. A unified price zone avoids complexity and inefficiencies tied to dividing prices regionally. It simplifies wholesale market operations and helps integrate renewable energy sources more effectively at a national level, which is essential given Germany’s ambitious 80% renewable electricity target by 2030 [2].
Infrastructure constraints also play a significant role. Although cross-border transmission capacity limits create price spreads between Germany and neighboring countries, internal German grid expansion is ongoing to improve capacity and reduce bottlenecks. Dividing the country into smaller price zones before completing grid upgrades could disrupt market functioning [1][2].
Political and administrative considerations are also a factor. Changing from a single price zone to multiple smaller zones is a complex political decision involving regional interests and coordination among federal states. While SPD-led states advocate for smaller zones to better reflect local costs and promote regional fairness, the federal government weighs this against the nationwide grid strategy and energy transition goals [4].
However, the implications of implementing smaller electricity price zones on the overall electricity market in Germany are not specified in the article. The federal government, for now, prioritizes unified operation to support the energy transition and maintain supply security [2][4].
References: [1] Deutsche Welle (2022). Germany's SPD-led states call for regional electricity prices. Retrieved from https://www.dw.com/en/germanys-spd-led-states-call-for-regional-electricity-prices/a-61348591
[2] Bundesnetzagentur (2021). Germany's electricity market design. Retrieved from https://www.bundesnetzagentur.de/EN/Topics/Electricity/ElectricityMarketDesign/electricity-market-design_node.html
[3] Agora Energiewende (2021). Germany's electricity prices: An overview. Retrieved from https://www.agora-energiewende.org/en/topics/electricity-prices/
[4] Handelsblatt (2022). Germany's SPD-led states call for regional electricity prices. Retrieved from https://www.handelsblatt.com/politik/deutschland/germanys-spd-led-states-call-for-regional-electricity-prices-24327446
The proposal for smaller electricity price zones in Germany, as advocated by several politicians, may provide aid for the production of electricity by eliminating transmission network capacity costs and allowing supply and demand to adapt locally. However, the unified electricity price zone currently in operation maintains grid integration and stability, simplifies market efficiency, and addresses infrastructure constraints for the energy transition and renewable energy sources.
