Austrian-German electricity market set to split up?

For the last 15 years, Austria and Germany have operated as a single energy market, worth €200bn a year. However, Germany is now looking to end this – and wind is part of the reason why.

Last month, German grid regulator Bundesnetzagentur (BNetzA) announced that Amprion, EnBW Transportnetze, TenneT and 50Hertz Transmission – the four German transmission companies – would have to prepare for a split of the German and Austrian power markets, due to become effective on 3 July 2018.

BNetzA is looking for a way to manage the excess wind power that is flowing from Germany to Austria, and causing problems for the grid. The issue here is that the German grid has not been able to keep up with the fast growth in renewables, and wind in particular. On very windy days, wind farms in north Germany produce more energy than the system can support.

The oversupply then flows to Austria, and also to the neighbouring countries of Poland and the Czech Republic. This causes problems because it puts stress on the grids of four countries, and causes disruption for consumers and businesses.

The inefficiency of the German grid also means that Germany is in the bizarre situation that its excess wind power is not being used by individuals and businesses in the south of the country. These customers then need to buy power from more expensive traditional power plants locally. And this is the main reason why the German government is now taking action.

The Agency for the Cooperation of Energy Regulators has been asked to decide in the matter, and last week it made public its decision of implementing a new bidding zone border between Germany and Austria to ease congestion on the interconnection between the countries.

And, as part of this approach, the German government still needs to commit to invest more in developing its power grid.

So wind has contributed to a problem – but what does the solution mean for consumers and companies in the wind sector?

First, it means that consumers in Austria could lose out. Ending the free flow of this excess power would cause a 15% rise in Austrian energy prices, according to an estimate by consultants Frontier Economics and Consentec.

That is not great news for consumers, but may open up opportunities for wind companies to develop new schemes in Austria, which still has a small 2.4GW of installed wind capacity compared to Germany’s 45GW. If Austria’s leaders want their people to continue to benefit from low-cost power then they may end up promoting more investment in wind to keep costs of energy low, and therefore attracting more investors.

Second, we might also see an increase in support for wind power in south Germany. If the excess from the power from the north flows into the south, then this could help reduce the cost of power in the south – and increase support for new wind developments. German consumers could also benefit from paying €280m less per year on grid-balancing fees.

It is still early days, though. The argument between Germany and Austria is ongoing, and Austrian regulator E-Control is considering legal actions against Germany, warning about the damage that the end of a shared market could cause for consumers in its country.

Still, it could lead to new business for wind companies.