New bidding zones would drive up electricity prices in CEE

The European Electricity Transmission System Operators (ENTSO-E) released a Bidding Zone (BZ) study, which evaluates 14 alternative bidding zone configurations to establish optimal bidding zone layouts in Europe. The aim is to maximise economic efficiency and cross-zonal trading opportunities while maintaining security of supply.

A bidding zone is a geographical area where electricity can be bought and sold without considering physical grid limitations.

The report contains two proposals: one for Central Europe (comprising the BZs of France, Belgium, the Netherlands, Germany–Luxembourg, Austria, the Czech Republic, Poland, Slovakia, Hungary, Slovenia, Croatia, Romania, most of Denmark and Northern Italy) and one for the Nordic region. The recommendations are intended to help Member States decide whether to amend or maintain current bidding zone configurations.

The section of the study concerning Central Europe focuses on the division of the German-Luxembourgish zone, which is expected to result in higher economic efficiency under several different combinations (ranging from 251 million to 339 million euros in 2025).

However, all of these scenarios would increase electricity prices by one to three euros in the southern German zone(s), Luxembourg, Czechia, Austria, Slovakia, Hungary, Slovenia, Croatia, and Romania. The highest price increases would be observed in Czechia, around 3 euros/megawatt-hour (MWh). A decrease in prices, around 4 euros/MWh, would be observed for the northern German zone(s) and Denmark.

Among the analysed alternative configurations, the split of Germany–Luxembourg into five BZs would deliver the highest economic efficiency.

Economic efficiency is calculated as the difference between the change in market welfare and the change in additional costs from redispatch compared to the status quo. For all German–Luxembourgish split configurations, the decrease in market welfare would be compensated by redispatch cost savings of approximately 50 per cent, with a payback period of 4–9 years.