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On the Long-Term Efficiency of Market Splitting in Germany

Fraunholz, Christoph; Hladik, Dirk; Keles, Dogan; Möst, Dominik; Fichtner, Wolf

Abstract:
In Europe, the ongoing renewable expansion and delays in the planned grid extension have intensified the discussion about an adequate electricity market design. Against this background, we jointly apply an agent-based electricity market model and an optimal power flow model to investigate the long-term impacts of splitting the German market area into two price zone. Our approach allows capturing long-term investment and short-term market behavior under imperfect information. We find strong impacts of a German market splitting on electricity prices, expansion planning of generators and required congestion management. While the congestion volumes decrease significantly under a market split in the short term, the optimal zonal configuration for 2020 becomes outdated over time due to dynamic effects like grid extension, renewable expansion and new power plant investments. Policymakers and regulators should therefore regularly re-assess bidding zone configurations. Yet, this stands in contrast to the major objective of price zones to create stable locational investment incentives.

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Volltext §
DOI: 10.5445/IR/1000105902
Veröffentlicht am 18.02.2020
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Industriebetriebslehre und Industrielle Produktion (IIP)
Publikationstyp Forschungsbericht/Preprint
Publikationsjahr 2020
Sprache Englisch
Identifikator ISSN: 2196-7296
KITopen-ID: 1000105902
Verlag KIT, Karlsruhe
Umfang 41 S.
Serie Working Paper Series in Production and Energy ; 38
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