Future Power Market Platform

The bidding zone review showed large pricing zones are inadequate for effective congestion management in countries with larger shares of wind- and solar power. Large pricing zones provide the wrong incentives and could result in demand side flexibility escalating rather than supporting the management of grid congestion. However, ENTSO-e also emphasized in the report the risk for liquidity and market efficiency that would result from a shift to smaller bidding zones.

At the FPM workshop was therefore discussed an alternative solution to facilitate effective congestion management with the help of demand side flexibility, while maintaining the liquidity of large market regions: local marketplaces as an adoption of the internationally established locational marginal pricing auction design to the European needs (FPM Report: Local Market places, 3/2025).

The approach could make an important contribution towards affordable power prices by

• Avoiding redispatch costs already at the scale of 3-4 billion Euro/year in countries like Germany, and estimated to escalate across Europe to more than 100 billion Euro by 2040 in a “Business as Usual scenario”.
• Enhancing the efficiency of network use and thus reducing the need and costs for network expansion.
• Enhancing liquidity and market transparency and thus ensuring a more efficient and competitive market further reduces costs for consumers.

While benefits for European consumers at large are generally acknowledged, three questions are often raised about the introduction of local marketplaces: Does the market design meet needs of European consumers, how could it be adopted in a reasonable timeframe, and how would local price risks be addressed? They warrant a proper discussion at this upcoming JRC - FPM workshop to explore if they can be adequately addressed.