Answers to frequently asked questions on Germany’s and Austria’s single bidding zone for electricity

What is the single bidding zone for electricity?

Currently, there are no restrictions on the electricity trade between Germany and Austria, i.e. the two countries share a single bidding zone. The German and European regulatory authorities, the German Federal Network Agency and ACER, want to impose restrictions on electricity trading, effectively putting an end to the single bidding zone that has been in place for about 15 years.

Austria was in favour of maintaining the common electricity market. While the country finally agreed with Germany on restrictions in May 2017, electricity trading between the traditionally well-integrated markets will for the most part remain possible. If no agreement had been reached, Germany would have unilaterally split up the bidding zone, which would have resulted in significantly poorer conditions for Austrian consumers and the market. The solution reached ensures that electricity trade between Germany and Austria largely remains intact to the extent required by the market.

Why does Germany want to restrict electricity trading?

Germany’s commitment to transition to sustainable energy resources has significantly changed its production focus. As a result, electricity transmission systems are more heavily used. The German Federal Network Agency hopes that splitting up the bidding zone will reduce congestion in the German transmission system and improve system stability. The only viable long-term solution would require Germany to expand its electricity transmission systems connecting the north to the south. Additionally, capacity at the border is increased by expanding the power line from the federal province of Upper Austria to the German federal state of Bavaria.

When will the restrictions on electricity trading take effect?

Minor restrictions on the currently unlimited trade activities on the German-Austrian electricity market will take effect as of 1 October 2018. Yet a cross-border exchange in electricity will remain possible to a large extent: up to 4.9 gigawatts of electricity can be traded. This is equivalent to about half of Austrian consumption in peak periods.

Will the split-up increase electricity prices?

It can be assumed that restrictions on the electricity trade between Germany and Austria will increase electricity prices in Austria. This is the case because it can be assumed that prices for electricity suppliers procuring electricity at the exchange will rise along with wholesale prices. Suppliers will likely pass on part of these increased costs to consumers.

How much will electricity prices increase?

E-Control was able to ensure that electricity trade between Germany and Austria largely remains intact to the extent required by the market. The additional costs for Austrian electricity consumers resulting from the trade restrictions will be much lower than originally expected.

At the same time, increased electricity prices lower the consumer contribution to the green electricity support scheme. This is the case because the amount of financial support for green electricity generation depends on the market prices for electricity: the higher the electricity prices, the lower the amount of financial support.

The electricity supplied to a consumer by a supplier accounts for about a third of the total sum stated on the electricity bill. The rest are system charges as well as taxes and charges.

How will the split-up of the single bidding zone for electricity technically be realised?

The existing power lines connecting Germany and Austria will remain in place, no power lines will be cut. But measures to curb electricity trading will be taken.

Why did Austria and Germany establish a common electricity market in the first place?

Power lines connecting Germany and Austria are well developed. When energy markets were liberalised about 15 years ago, Germany and Austria thus established a common electricity market. This single market is considered a best-practice model for market integration in the European Union. In the current model, Austria can easily import electricity from Germany and vice versa.

Who is in favour of splitting up the single bidding zone? Who is against it?

The German and European regulatory authorities, the German Federal Network Agency and ACER, want to split up the single bidding zone for electricity. Austria was in favour of maintaining the common electricity market, but in May 2017, reached a solution with Germany according to which restrictions on trading will be imposed. Yet, electricity trading between the traditionally well-integrated markets will for the most part remain possible.

Poland and the Czech Republic also called for splitting up the German-Austrian electricity market, which they hope will ease congestions in their electricity transmission systems.