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Study: Splitting the German power market increases cost of power supply by 100 million Euro per year

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Berlin / Leipzig / Paris

Analysis of the economic effects of splitting the German-Austrian price zone shows that considerable inefficiencies would arise

Berlin / Leipzig / Paris, 24 February 2015 – EEX and EPEX SPOT have jointly published a study entitled “Economic efficiency analysis of introducing smaller bidding zones” and presented the results in Berlin today. Both exchanges have asked the energy policy consultancy Consentec to conduct this analysis, in order to provide quantitative insights for the current discussion regarding a potential split of the German-Austrian bidding zone.

The study compares the economic costs and benefits of splitting up the German-Austrian power market into two bidding zones. A trade-off between costs is revealed: If the bidding zone is split, costs for redispatch can be reduced in some cases while continuous inefficiencies arise from uncertainties when determining total transmission capacities between the smaller zones. Comparing these two cost factors, the study shows that a split of the German-Austrian bidding zone would increase total cost of power supply by up to 100 million Euro per year. Additional factors such as loss of liquidity and substantial transaction costs would add to those inefficiencies.

“The results of our analysis clearly recommend avoiding a split of large and liquid bidding zones, especially looking at the benefits provided by the already integrated and well established German-Austrian power market. Its unmatched liquidity provides a reference price for Europe”, says Dr. Christoph Maurer, Managing Director of Consentec. “Instead of splitting bidding zones, markets should be further integrated. For this, grid extension is the only viable solution.”

The study can be found on the websites of EEX (www.eex.com) and EPEX SPOT (www.epexspot.com ) or by following the link above.

The European Energy Exchange (EEX) is the leading energy exchange in Europe. It develops, operates and connects secure, liquid and transparent markets for energy and commodities products. At EEX, contracts for Power, Coal and Emission Allowances as well as Freight and Agricultural Products are traded or registered for clearing. Alongside EEX, EPEX SPOT, Powernext, Cleartrade Exchange (CLTX) and Gaspoint Nordic are also part of EEX Group. Clearing and settlement of trading transactions are provided by the clearing house European Commodity Clearing (ECC).

The European Power Exchange EPEX SPOT SE operates the power spot markets for Germany, France, Austria and Switzerland (Day-Ahead and Intraday). Together these countries account for more than one third of the European power consumption. EPEX SPOT also acts as market operating service provider for the Hungarian Power Exchange HUPX and operates the coupling between the Czech, the Slovak, the Hungarian and the Romanian markets on behalf of the local Exchanges. It is a European company (Societas Europaea) based in Paris with branches in Leipzig, Bern and Vienna. Over 220 companies from Europe are active on EPEX SPOT. 382 TWh have been traded on EPEX SPOT’s markets in 2014.
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