Strategic Bidding Zone Configuration for Enhanced Grid Efficiency: A Case Study of Germany's Electricity Market

This study examines the impact of different market split configurations on grid congestion within the German electricity market, employing a forward-looking analysis that spans from 2030 to 2050. Utilizing locational marginal prices (LMPs) generated by a power flow model for the European transmission grid, we explore five distinct market split scenarios against a reference scenario of a single national market. Our findings reveal that while market splits show potential to alleviate grid congestion in the long term, short to medium-term outcomes indicate a persistence or even an increase in congestion levels. The analysis underscores the significant role of renewable energy sources (RES) feed-in simultaneity as a primary driver of grid congestion, a factor that remains relatively unaffected by market splitting due to ambitious RES deployment goals. Although one of the split scenarios analyzed consistently outperforms the reference case in the medium and long term, the persistence of major congestion corridors suggests that market splitting alone is not sufficient to address structural bottlenecks. This study highlights the necessity for integrating market split strategies with comprehensive grid development and RES integration plans, aiming for a more holistic approach to enhancing grid and market efficiency in Germany's transition towards a more sustainable energy system.