Germany‘s energy landscape may undergo significant changes as the Bundesnetzagentur, the country’s energy grid regulator, proposed a plan in April 2025 to divide the existing power market into five distinct bidding zones. This new effort will specifically address the variation in costs across the country and across different regions. It could save electricity consumers approximately €1.5 billion ($1.71 billion) from 2026-2028.
The proposal comes amid intense concern and opposition from Germany’s four main transmission operators—50hertz, Amprion, TenneT, and TransnetBW. In particular, they are concerned about the heavy reliance on outdated data in the report supporting this plan. They maintain that the expected advantages of the new division fall far short when compared with overall system costs. The operators advise that the approach taken in the analysis fails to properly represent the nuances of the market realities we find ourselves in today.
The European Network of Transmission System Operators for Electricity (ENTSO-E) recently released its conclusions. They recommend splitting the market up into five bidding zones, as this would be the most economically efficient approach for Germany. This division would amount to between €251 million ($285.5 million) and €339 million in 2025. Contrary to the analysis released by ENTSO-E, all market segmentation possibilities would bring significant economic benefits.
One of the main drivers behind this market reform is Germany’s single electricity power market zone. This area includes Luxembourg. This arrangement has recently been marred by issues of grid congestion and inequities in the distribution of renewable energy. The segmentation attempts to provide a better picture of the unique costs across various regions. Specifically, northern states in Germany—home to most of the country’s renewable production—could see significantly reduced prices as a consequence.
Germany’s incoming coalition government — a so-called Jamaica coalition — is calling this proposal to the mat. They’re concerned that fracturing the market would lead to significant price increases in southern areas, a prospect which would be damaging to industrial activity. The regional government has been alarmed at the prospect of increasing energy costs damaging competitiveness. They fear that all of the challenges that they currently face would be greatly exacerbated.
Sweden is currently prepared to block consent for a new electricity interconnector with Germany. They will continue to do so unless the market is fundamentally restructured. We imagine this creates even greater urgency to the conversation surrounding the proposed segmentation. International energy interconnections are essential in maximizing efficiencies within Germany’s supply chain while guaranteeing their domestic energy security.