Frontier assesses the effect of splitting European electricity markets

Germany and other European countries face increasing challenges in managing load flow and congestion on their electricity transmission networks. Some have argued that splitting one electricity bidding zone in two or more zones (“market splitting”) may help mitigate such congestion by sending cost reflective zonal price signals to network users.

In a recent report for the German energy regulator, Frontier (Europe) and technical consultant Consentec developed a framework to help evaluate the case for market splitting using technical and economic criteria. Appling this framework to the Germany-Austria bidding area, the report finds that the technical criteria for market splitting would not be met in this case. The report also finds that splitting Germany-Austria into two or more bidding areas may have an adverse effect on market concentration, market liquidity and transmission investment, which may deter the further integration of the European energy market.

Frontier regularly advises public private and sector clients on strategy and market design within the energy sector.

For more information, please contact Paul Cullum at p.cullum@frontier-economics.com or call +44 (0) 20 7031 7000.

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