In Germany, the introduction of new electricity price zones is being considered. The north produces a large proportion of green electricity, while the south consumes more. This divide in the electricity market could have far-reaching consequences. Competitiveness is particularly important for Germany as an industrial location. At the same time, the energy transition will be almost impossible to achieve without a clear course for grid expansion.
Electricity price zones as a new line of conflict
A growing number of experts are calling for regional electricity prices, adjusted to supply and demand. Prices would be lower in the north, where wind power is abundant, while higher electricity costs would be unavoidable in the south, with its strong industrial sector. This would mean the dissolution of the uniform electricity price zones. However, while experts are calling for regional price signals, the BDEW (German Energy and Water Industries) is sticking with the current model.
Industry representatives view this development critically. They warn that high electricity prices pose a massive threat to the already weak economy. The steel industry is suffering particularly badly. According to the German Steel Federation, production fell by almost 12 percent in the first half of the year. This brings Germany’s industrial capacity to its limits.
Energy Transition and Economy Under Pressure
“The slump in production in our sector demonstrates how dramatic the situation is for Germany as an industrial location,” explained Kerstin Maria Rippel, Managing Director of the German Steel Federation. She emphasizes that internationally competitive electricity prices are essential for energy-intensive industries like steel.
The EU Commission also advocates a move away from the current electricity price zones. Several northern German heads of government support this course. However, rising prices are strictly rejected in the south. Bavaria, in particular, points to the impending disadvantages for the regional economy. At the same time, the Ministry of Economic Affairs emphasizes that the federal government intends to adhere to the model of a single electricity price zone.
Grid expansion as a decisive factor
The BDEW cites a study by the EU regulatory authority ACER, which considers the division of electricity price zones to be economically unconvincing. At the same time, the association warns of years of uncertainty for investors, which could jeopardize grid expansion. Without clear framework conditions, the energy transition is hardly feasible.
Energy experts see the situation differently. Lion Hirth of the Hertie School in Berlin explains: “Only local prices on the electricity market can meaningfully translate the dynamics of the electricity grid into flexibility incentives.” As long as there isn’t enough electricity to be transported to the south, differences must be reflected through electricity prices. Grid expansion has so far lagged significantly behind renewable energy generation.
Experts call for new approaches
Andreas Löschel of Ruhr University Bochum also emphasizes that the supply and demand in the electricity market are increasingly diverging. Only regional price differences can resolve this discrepancy. He believes that electricity price zones are a logical progression of the energy transition.
Bernd Weber of the Epico think tank adds that renewable energy generation is growing faster than grid expansion. “Smaller price zones are economically more efficient because they better reflect differences in generation capacity and grid infrastructure.” He sees positive examples in Scandinavia.
The future of electricity markets remains open
Weber sees market-based advantages in abandoning uniform electricity price zones. Investments could be directed more efficiently and regional strengths could be leveraged. Disadvantages for companies in high-cost regions would need to be offset politically. This could create long-term stability for Germany as an industrial location.
At the same time, Weber warns against an overly politicized debate. Without bold decisions, structural problems will remain unresolved. Lion Hirth also warns: For the energy transition to succeed, an electricity market design must take physical and economic realities into account.
The German Energy and Water Industries Association (BDEW) disagrees. Spokesperson Katja Sandscheper emphasizes that grid expansion and the expansion of renewable energies must proceed in concert. The association remains committed to a single price zone. The future of the electricity market therefore remains highly competitive.