Changing bidding zone configurations will delay wind energy deployment
13 May 2025
Europe’s transmission system operators have published a much-anticipated Bidding Zone Review. The assessment, coordinated through ENTSO-E, the European Network of Transmission System Operators for Electricity, suggests possible adjustments to Europe’s electricity market structure. It explores 14 alternative bidding zone configurations across Central and Northern Europe. Critically, it proposes splitting the current Germany-Luxembourg bidding zone into five separate zones. In a joint statement, WindEurope and leading national renewable energy associations express strong concerns about these proposals.
The ENTSO-E Bidding Zone Review overall aims to enhance price signals, manage grid congestion and support the integration of renewables. For the Nordic region the review suggests keeping the current bidding zone configuration. Alternative configurations showed no clear benefits there. But for Central Europe the analysis suggests splitting the current German-Luxembourg bidding zone into five separate zones. This could improve market efficiency, ENTSO-E argues.
But the scenarios show relatively small annual cost savings of up to €339m. The report also acknowledges that any bidding zone reconfiguration would come with trade-offs, including impacts on market liquidity in the new smaller zones and transition costs.
What does the change mean?
Under the current structure, countries or regions operate as single bidding zones, meaning electricity is traded at a uniform price across their entire territory. The proposed new structure would split these areas into multiple smaller bidding zones, each reflecting localised grid constraints and offering different prices based on regional supply and demand. This shift aims to improve grid congestion management and price signals. But it could also lead to more frequent price fluctuations and fragmentation of the electricity market.
Wind industry expresses strong concerns
The wind energy industry expresses strong concerns about the proposed changes. In a joint statement, WindEurope and several national wind energy associations warn that altering bidding zones will create significant uncertainty. This would increase the cost of capital for new wind projects. It could delay or even derail many projects, especially the ones close to final investment decisions. Bidding zone splits will also increase wholesale market price volatility in the new, smaller zones. This will complicate long-term contracts such as two-sided Contracts for Difference (CfDs) and Power Purchase Agreements (PPAs) which are crucial to the deployment of wind energy.
Furthermore, the proposed alternative configurations are based on outdated assumptions and do not properly reflect ongoing grid reinforcements or the evolving market landscape including offshore bidding zones. Splitting key markets such as Germany could impact forward market liquidity and hedging opportunities with knock-on effects beyond the wind sector.
This is not what Europe needs now. Europe urgently needs accelerated renewable deployment to strengthen its energy security, support the competitiveness of its industry and meet its climate targets.
WindEurope CEO Giles Dickson said: “There may be arguments for splitting up existing bidding zones in electricity markets. But it would increase uncertainty about the future revenues of power plants. And that would undermine investments in new renewables. Building more renewables is top priority right now. It needs huge investments. Which needs maximum possible certainty. Don’t make things even harder by adding new uncertainty.”
To resolve congestion without undermining investment certainty, Europe should instead focus on grid expansion and massive scale-up of flexibility solutions.
What are the next steps?
Member States now have six months to decide whether to pursue any of the proposed changes. If no agreement is reached, the European Commission may intervene.
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