The implications of two German price zones in a european-wide context

As German TSOs are faced with the threat of north-south transmission line overloading, the option of a national bidding zone reconfiguration in the form of a separate northern and southern bidding zone is investigated. By imposing a limit on north-south transactions during market clearing, less redispatch actions are necessary afterwards, as such resulting in more efficient congestion management. However, through market coupling, a national bidding zone reconfiguration also has an impact on neighbouring electricity markets. This paper analyzes the altered interactions between electricity markets caused by the introduction of two German prices zones by means of a cost-minimizing dispatch model. Besides modifying the market outcome within Germany, this market design change also impacts consumers and producers in other European countries. Therefore, a national bidding zone reconfiguration should always be analyzed in a European wide context.