The German electricity market is changing fundamentally as renewable energy replaces conventional sources. Simultaneously, regional imbalances between generation and consumption are appearing. The authors sketch a new market design for the German electricity market, jointly taking into account the efficient expansion of renewables and the grid’s stability. A premium paid in addition to the spot market price promotes renewable electricity. Furthermore, they propose to split the German electricity market into a small number of price zones to cope with insufficient transmission capacities. By systematically strengthening regional and temporal price signals, the authors expect a notable cost reduction of the energy transition to be achieved.

Löschel, Andreas, Florens Flues, Frank Pothen and Philipp Massier (2013), Der deutsche Strommarkt im Umbruch: Zur Notwendigkeit einer Marktordnung aus einem Guss, Wirtschaftsdienst 93. Jahrgang, Heft 11, November, 778-784. Download