Energy-intensive industry in electricity bidding zones
Our figure of the month 09/2025
When the wind blows, wind turbines produce electricity, electricity prices fall and demand for electricity rises – throughout Germany. However, since most of the electricity is produced in northern Germany and cannot be transmitted to southern Germany in sufficient quantities, part of the additional demand there is met by gas-fired power plants, while wind turbines in the north are curtailed. This process is described as re-dispatch and, according to the Federal Network Agency, causes annual inefficiency costs of around €2.77 billion.
The European Agency for the Cooperation of Energy Regulators calculated various scenarios (see Bidding Zone Study Report) for a more efficient electricity market in Germany in order to reduce the costs of inefficient allocation. The most effective scenario proved to be a division of the German electricity market into a total of five electricity bidding zones. According to the authors, this would enable annual efficiency gains of up to €339 million. Local electricity prices could thus improve market mechanisms through price signals and help trading capacities to be used more efficiently. However, one consequence would be that prices would differ between zones. In Schleswig-Holstein, the price would fall by almost 14%, while in the south (Bavaria, Baden-Württemberg, Hesse) and west (North Rhine-Westphalia, Rhineland-Palatinate, Saarland) it would rise.
Energy-intensive industries are particularly affected by electricity prices. According to the Federal Statistical Office, these industries account for 76% of industrial energy consumption, while employing around 15% of the workforce. The figure shows the share of employment in the energy industry according to the five electricity bidding zones, as well as the expected changes in electricity prices in these zones. The turquoise zone around North Rhine-Westphalia, Rhineland-Palatinate and Saarland has the highest share of energy-intensive industries at almost 22%. Here, the price increase would be around 1%. In the zone comprising Bavaria, Baden-Württemberg and Hesse, the price increase would even be 3%. A division of the electricity market would therefore increase production costs here and reduce competitiveness on the world market. For the north, this would send a strong signal for the establishment of new industries.
Note: For the sake of simplicity, the electricity bidding zones have been subdivided according to federal state borders. The values are shown for the corresponding electricity bidding zones.
Sources: Federal Employment Agency, Bidding Zone Study Report
Since energy-intensive industry is capital-intensive and costs are passed on to customer industries such as vehicle and mechanical engineering, looking solely at employment figures only reveals part of the problem, especially since all other electricity consumers would also be affected by different prices in electricity bidding zones.
According to the Ministry of Economics, the federal government intends to stick to the uniform electricity price zone and thus accept the inefficiency costs for the time being. An efficient solution for reducing re-dispatch costs would be the rapid expansion of power lines from north to south. One positive sign is the expansion of SuedLink, which has already begun in the first quarter of 2025.
Other figures can be found here.