WindEurope criticises call to break up German power market as creating uncertainty
Zonal pricing switch would cause uncertainty around revenues for wind and solar plants at time when this is crucial to encouraging buildout, says WindEurope chief
WindEurope has criticised a call from Europe’s association of transmission system operators to split up Germany’s power market, saying it would “increase uncertainty” for developers at a time when building more renewables is the top priority.
The European Network of Transmission System Operators for Electricity (ENTSO-e) today released its report on a study of different bidding zone arrangements in Central Europe and the Nordics.
The association said that its simulation results showed there is “higher economic efficiency” for the currently unified German–Luxembourgish region if it is split into bidding zones, with benefits ranging from €251m to €339m ($285m-€385m).
The highest end of that range came from splitting the region into five zones.
ENTSO-e cautioned that the proposal “does not take important additional aspects into account and therefore should not be seen in isolation, but rather in combination with certain considerations,” which should be thoroughly assessed before a decision is taken.
Germany’s grid currently lacks capacity to send power from its wind-rich north to southern demand centres, prompting some calls for an at least two-way split of the market. That would likely see prices fall in the north but could pose a threat to heavy industry in the country’s south.
“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.”
“We remain committed to the single German-Luxembourg electricity bidding zone,” they said.
Casimir Lorenz, head of advisory for Central Europe at Aurora Energy Research, wrote on LinkedIn that to “block a price zone split (PZS), Germany must persuade all neighbouring countries within six months to unanimously reject the ENTSO-E recommendation.”
“If not, the decision escalates to the EU Commission, which then has another six months to decide.”
“But even if a PZS is avoided, investment risk is rising. Alternative measures could still impact revenues of both new and existing assets. But now, with uncertainty around what alternative solutions will be implemented, investors should prepare for additional risks.”
Two risks that he said could “significantly impact portfolios” are uncompensated curtailment of new renewable assets at grid bottlenecks; and “local (and potentially dynamic) cost/pricing elements to influence the bidding behaviour of flexible generation assets.”
Carsten Junge, a Germany-based grid connection manager at Swedish power giant Vattenfall, wrote: "You cannot move a generator or connect it elsewhere, so changing zone borders with the risk that an established or already planned but not yet built project finds itself on the 'wrong' side of said border, create uncertainty that no one needs."
The German Chemical Industry Association wrote that such a change would cause "significant uncertainty for both consumers and producers. This is the exact opposite of what we need in the current difficult situation and with regard to the urgently needed transformation."