IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v38y2017i5p129-152.html

The Relevance of Grid Expansion under Zonal Markets

Author

Listed:
  • Joachim Bertsch
  • Tom Brown
  • Simeon Hagspiel
  • Lisa Just

Abstract

The European electricity market design is based on zonal markets with uniform prices. Hence, no differentiated locational price signals are provided within these zones. If intra-zonal congestion occurs due to missing grid expansion, this market design reveals its inherent incompleteness, and might lead to severe short and long-term distortions. In this paper, we study these distortions with a focus on the impact of restricted grid expansion under zonal markets. Therefore, we use a long-term model of the European electricity system and restrict the allowed expansion of the transmission grid per decade. We find that the combination of an incomplete market design and restricted grid expansion leads to a misallocation of generation capacities and the inability to transport electricity to where it is needed. This results in an energy imbalance in some regions of up to 2-3% and difficulty when reaching envisaged political targets in the power sector.

Suggested Citation

  • Joachim Bertsch & Tom Brown & Simeon Hagspiel & Lisa Just, 2017. "The Relevance of Grid Expansion under Zonal Markets," The Energy Journal, , vol. 38(5), pages 129-152, September.
    • Handle: RePEc:sae:enejou:v:38:y:2017:i:5:p:129-152
    DOI: 10.5547/01956574.38.5.jber
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.38.5.jber
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.38.5.jber?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Grimm, Veronika & Martin, Alexander & Schmidt, Martin & Weibelzahl, Martin & Zöttl, Gregor, 2016. "Transmission and generation investment in electricity markets: The effects of market splitting and network fee regimes," European Journal of Operational Research, Elsevier, vol. 254(2), pages 493-509.
    2. Fürsch, Michaela & Hagspiel, Simeon & Jägemann, Cosima & Nagl, Stephan & Lindenberger, Dietmar & Tröster, Eckehard, 2013. "The role of grid extensions in a cost-efficient transformation of the European electricity system until 2050," Applied Energy, Elsevier, vol. 104(C), pages 642-652.
    3. Schaber, Katrin & Steinke, Florian & Hamacher, Thomas, 2012. "Transmission grid extensions for the integration of variable renewable energies in Europe: Who benefits where?," Energy Policy, Elsevier, vol. 43(C), pages 123-135.
    4. Friedrich Kunz, 2013. "Improving Congestion Management: How to Facilitate the Integration of Renewable Generation in Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    5. Jan Richter, 2011. "DIMENSION - A Dispatch and Investment Model for European Electricity Markets," EWI Working Papers 2011-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Yifan & Guo, Ju’e & Li, Yi & Zhou, Jiandong, 2024. "Forecasting day-ahead electricity prices with spatial dependence," International Journal of Forecasting, Elsevier, vol. 40(3), pages 1255-1270.
    2. Østergaard, P.A. & Andersen, A.N. & Nielsen, F.D., 2025. "Market zones and electrification – A case study on the impact of market zone configuration on power-to-heat," Renewable and Sustainable Energy Reviews, Elsevier, vol. 219(C).
    3. Lu, Heyu & Li, Jiayang & Wu, Zongfa & Zeng, Yufeiyang, 2025. "Rethinking energy allocation: Can green finance be the solution? — Evidence from machine learning method," Energy, Elsevier, vol. 332(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joachim Bertsch, & Tom Brown & Simeon Hagspiel & Lisa Just, 2017. "The relevance of grid expansion under zonal markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    2. Joachim Bertsch & Tom Brown & Simeon Hagspiel & Lisa Just, 2016. "The relevance of grid expansion under zonal markets," EWI Working Papers 2015-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    3. Joachim Bertsch & Simeon Hagspiel & Lisa Just, 2016. "Congestion management in power systems," Journal of Regulatory Economics, Springer, vol. 50(3), pages 290-327, December.
    4. Janda, Karel & Málek, Jan & Rečka, Lukáš, 2017. "Influence of renewable energy sources on transmission networks in Central Europe," Energy Policy, Elsevier, vol. 108(C), pages 524-537.
    5. Gerbaulet, Clemens & von Hirschhausen, Christian & Kemfert, Claudia & Lorenz, Casimir & Oei, Pao-Yu, 2019. "European electricity sector decarbonization under different levels of foresight," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 141, pages 973-987.
    6. Fraunholz, Christoph & Hladik, Dirk & Keles, Dogan & Möst, Dominik & Fichtner, Wolf, 2021. "On the long-term efficiency of market splitting in Germany," Energy Policy, Elsevier, vol. 149(C).
    7. Reichenberg, Lina & Hedenus, Fredrik & Odenberger, Mikael & Johnsson, Filip, 2018. "The marginal system LCOE of variable renewables – Evaluating high penetration levels of wind and solar in Europe," Energy, Elsevier, vol. 152(C), pages 914-924.
    8. Tafarte, Philip & Lehmann, Paul, 2023. "Quantifying trade-offs for the spatial allocation of onshore wind generation capacity – A case study for Germany," Ecological Economics, Elsevier, vol. 209(C).
    9. Michaela Fuersch & Dietmar Lindenberger, 2013. "Promotion of Electricity from Renewable Energy in Europe post 2020 - the Economic Benefits of Cooperation," EWI Working Papers 2013-16, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    10. Cosima Jägemann, 2014. "A note on the inefficiency of technology- and region-specific renewable energy support - The German case," EWI Working Papers 2014-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    11. Joachim Bertsch & Simeon Hagspiel & Lisa Just, 2016. "Congestion management in power systems - Long-term modeling framework and large-scale application," EWI Working Papers 2015-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    12. Bertsch, Joachim & Growitsch, Christian & Lorenczik, Stefan & Nagl, Stephan, 2016. "Flexibility in Europe's power sector — An additional requirement or an automatic complement?," Energy Economics, Elsevier, vol. 53(C), pages 118-131.
    13. Heard, B.P. & Brook, B.W. & Wigley, T.M.L. & Bradshaw, C.J.A., 2017. "Burden of proof: A comprehensive review of the feasibility of 100% renewable-electricity systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 1122-1133.
    14. Savvidis, Georgios & Siala, Kais & Weissbart, Christoph & Schmidt, Lukas & Borggrefe, Frieder & Kumar, Subhash & Pittel, Karen & Madlener, Reinhard & Hufendiek, Kai, 2019. "The gap between energy policy challenges and model capabilities," Energy Policy, Elsevier, vol. 125(C), pages 503-520.
    15. Grimm, Veronika & Rückel, Bastian & Sölch, Christian & Zöttl, Gregor, 2021. "The impact of market design on transmission and generation investment in electricity markets," Energy Economics, Elsevier, vol. 93(C).
    16. Grimm, Veronika & Sölch, Christian & Zöttl, Gregor, 2022. "Emissions reduction in a second-best world: On the long-term effects of overlapping regulations," Energy Economics, Elsevier, vol. 109(C).
    17. Cosima Jaegemann & Simeon Hagspiel & Dietmar Lindenberger, 2013. "The Economic Inefficiency of Grid Parity: The Case of German Photovoltaics," EWI Working Papers 2013-19, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    18. Geoffrey J. Blanford & Christoph Weissbart, 2019. "A Framework for Modeling the Dynamics of Power Markets – The EU-REGEN Model," ifo Working Paper Series 307, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    19. Zerrahn, Alexander & Schill, Wolf-Peter, 2017. "Long-run power storage requirements for high shares of renewables: review and a new model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 1518-1534.
    20. Veronika Grimm & Alexander Martin & Christian Sölch & Martin Weibelzahl & Gregor Zöttl, 2022. "Market-Based Redispatch May Result in Inefficient Dispatch," The Energy Journal, , vol. 43(5), pages 205-230, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:38:y:2017:i:5:p:129-152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.