The single bidding zone leads to grid congestion and costs – local market prices balance supply and demand regionally

Infografik of March 25, 2026

The infographic of the DIW Weekly Report 12/2026 compares two electricity market designs: a single bidding zone versus local market prices. It is divided into two columns, each illustrating how electricity supply, demand, and grid conditions interact. Left side: Single Bidding Zone (current electricity market design) Two scenarios are shown: High renewable energy production: Power surplus occurs, requiring curtailment of renewable generation. Grid congestion appears, visualized with a congested line. Excess supply pushes electricity prices downward. Low renewable energy production: Power shortages occur, requiring fossil fuel plants to ramp up. Grid congestion still occurs. Limited supply causes prices to rise. Redispatching (adjusting power plant output to manage congestion) is necessary in both situations and results in high system costs. Right side: Local Market Prices (reform option) The same two renewable‑production scenarios are shown, but with different outcomes: High renewable energy production: Local prices fall due to abundant supply. No grid congestion appears. No need for redispatch. Low renewable energy production: Local prices rise due to limited supply. Grid operates without congestion. No redispatching is required. The visual emphasizes that local pricing aligns regional supply and demand, reducing operational interventions and avoiding redispatch costs. Footer: License information: CC BY 4.0. Source credited as Own representation (DIW Weekly Report 12/2026).

Topics: Climate policy , Energy economics , Markets

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