Energy Innovation Hub | Zonal and nodal electricity pricing models - comparison

On August 30, 2018, Forum Energii organized the second meeting of the Energy Innovation Hub. The guest of the meeting was prof. Lion Hirth from the Hertie School of Governance in Berlin and head of the consulting company NEON, who analyzed the nodal and zonal market models.

During the meeting, prof. Lion Hirth presented the results of a comparative study of the zonal and nodal market, which will be published shortly. The motivation to perform the analysis was the willingness to evaluate the interaction between the transmission network and the energy market.

The analysis is based on the diagnosis that too slow network development may affect the stability of electricity supply due to difficulties in distributing power from new power plants in a dynamically developing system and on the common energy market.

To maintain the frequency, the number of interventions on the energy market has been recently significantly increasing including the scope of redispatching. These activities generate costs that affect consumers. In the following years, the problems may grow, because so far the energy market model, based on large price zones, does not take into account the transmission capacity. In Germany, the issue of the division of price zones causes a lot of emotions. There is no certainty whether the locational market will generate appropriate economic incentives for modernization and investment in the energy sector.