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EPEX Splits Germany and Austria into two Separate Zones

power lines

As of 30 September 2018, the common bidding zone of Germany-Luxembourg-Austria of the EPEX SPOT was divided, with Germany-Luxembourg on the one hand and Austria on the other. 

Instead of unlimited cross-border flows between Germany (DE) and Austria (AT), there is now a at least 4.9 gigawatts (GW) of transit capacity between both countries. Depending on the network situation that is impacted by various components such as grid stability or extreme weather, additional capacity can be made available in the short-term. The allocation mechanism follows flow-based market coupling for the Central West Europe (CWE) region. Genscape's PowerRT platform shows the interconnectors between Germany and Austria (Figure 1).

Genscape PowerRT

The split of the common German and Austrian power market is fueled by Eastern European power markets (i.e. Hungary, Poland, the Czech Republic, and Slovakia) to circumvent German loop flows, and to ease bottlenecks in their region. In times of congestion, excess electricity could flow from northern Germany through east European grids into Austria or southern Germany, looping around the blockage (Figure 2).

The Agency for the Cooperation of Energy Regulators (ACER) estimates the loss in revenues for the Polish and Czech economies at 25 million euros a year. The so-called loop flows would also cause rising costs and less stability.

Genscape PowerRT

With the split into two bidding zones, market-based capacity allocation on the border can lead to different DA clearing prices.

Even if regulators expect an average DE-AT spread of €2-3/MWh on an annual basis, the initial spreads were volatile in the first week of October 2018. The first auction settlements moved from a spread at €1.95/MWh in the first session to over €40/MWh in the third session (Figure 3). Austria was trading at a premium in all cases and could not benefit from the cheaper German electricity.

Genscape PowerRT

The split between Germany and Austria was necessary to alleviate the pressure on Germany’s neighbouring grids. Even if Austria campaigned against it, it was favoured over other options: splitting the German grid, installing phase shifters on both sides of the borders or increasing grid capacity. As the market continues to change, industry players will need real-time insights into the grid to better understand the impacts. Genscape’s PowerRT provides this insight and helps to improve trading strategies, analyze production, vizualize fuels stacks, and optmize asset utilization. To learn more about PowerRT, please click here.

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