Managing congestion on the German electricity grid

With the increasing connection of wind power generation and the prospective closure of nuclear power stations, Germany is facing fundamental changes in power flows. These could lead to increasing congestion on the German power grid. While network operators are under an obligation to invest into the grid where this is economically desirable, the German energy regulator is also considering possible measures to take should congestion arise nonetheless. The German network regulator, Bundesnetzagentur, has just published a new study by Frontier (Cologne) in collaboration with engineering advisers Consentec GmbH, Aachen that explores the issue. 
 
The study investigates a number of different regimes to manage congestion and explores under which conditions the different approaches are suitable. The authors find that the current regime of cost based redispatch is the prefered option for the foreseeable future in the German context. The current regime exhibits some shortcomings and the authors propose refinement of the regime. An alternative and theoretically appealing approach of implicit auctions (also known as market splitting or market coupling) could have certain disadvantages in the specific German context:

• option value / implementation costs - it would require implementing a complex reform of the current regime, well in advance of any significant congestion potentially arising. This would mean an administrative burden to prepare for a situation that is uncertain to arise.
• regional market concentration - a market splitting model could create pockets of regional markets with high market concentration. This is because electricity generators have traditionally built power stations geographically concentrated around their historic supply areas.