The Impact of Bidding Zone Reconfiguration
A Flow-Based Analysis of the Netherlands and Germany on Market Efficiency, Congestion and Distributional Effects
J.P. Lamoré (TU Delft - Technology, Policy and Management)
Kenneth Bruninx – Mentor (TU Delft - Energy and Industry)
A. F. Correlje – Mentor (TU Delft - Economics of Technology and Innovation)
Lucas Narbondo – Graduation committee member (KYOS Energy Consulting)
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Abstract
The increasing congestion on the electricity grid in the Netherlands and Germany, combined with delays in grid reinforcement, has raised questions about the adequacy of the current zonal pricing model. As renewable energy integration grows, the assumption of unconstrained internal grids no longer holds, and redispatching has become more frequent and costly. These challenges have renewed interest in reconfiguring bidding zones to better reflect physical constraints and improve market signals. However, existing studies often focus on national contexts and overlook system-wide interactions across interconnected markets.
This thesis investigates how bidding zone reconfigurations in the Netherlands and Germany affect electricity market outcomes within a flow-based market coupling context. Using the Exact Projection method within a Lagrangian relaxation and dynamic programming framework, a flow-based market coupling model was developed to simulate various reconfiguration scenarios based on proposals from ACER's Bidding Zone Review 2. These include a North South split in each country individually and a simultaneous split in both.
A key contribution of this research is the development of a multi-dimensional assessment framework that evaluates congestion, market efficiency, and distributional effects across the entire system. The analysis shows that a Dutch split has limited system-wide impacts, while a German split significantly alters market dynamics, exposing grid bottlenecks, reducing internal redispatch, increasing redispatch needs in the Netherlands, and shifting price patterns. A simultaneous split amplifies these effects, primarily driven by the German configuration.
The findings highlight the importance of capturing interdependencies and cross-zonal dynamics. Without a multi-dimensional and system-wide perspective, critical outcomes remain hidden. This research bridges technical and societal aspects of market design, offering insights that support informed decision-making aligned with the goals of the energy transition.