Smart Market design for German distribution grids

Ecofys study for Agora Energiewende

Published: 21/03/2017

On behalf of Agora Energiewende, Ecofys, together with the Fraunhofer IWES, has developed and investigated smart market concepts for the management of grid congestion. In 2015, more than three percent of the gross electricity production was curtailed by redispatch measures and renewable curtailment (Einspeisemanagement), causing costs of nearly one billion Euro. Also after 2015, grid congestion will be a regular part of system operation. However, so far, there is no general market mechanism that would make use of the curtailed energy and would, thus, increase the efficiency of the power system.

Given this situation, the study at hand aims to develop and evaluate relevant concepts for so called smart markets in order to address grid congestion effectivly and efficiently, and to suggest a regulatory roadmap for implementation. The study defines smart markets as a mechanism of coordination which aligns the market and grid sphere and, thus, manages congestion more efficiently.

The challenge of grid congestion and, therefore, the characteristics of appropriate smart markets differ significantly depending on the grid area of interest. For that reason, using a morphological box, Ecofys developed six models and evaluated their applicability in four selected grid areas.

Our analysis shows that there is no universal model which could be recommended for all grid areas. In Schleswig-Holsetin (wind-dominated), concepts with flexibility procurement by the system operator are generally more appropriate. In Southern Germany (PV-dominated), however, quota models are more suitable where the system operator effectively restrict grid access of participants in times of congestion. Furthermore, our analysis shows that the way of price-building is highly dependent on the quality of competition and liquidity in the respective grid area. Free price-building requires high liquidity and competition. Otherwise, concepts with regulated price-building should be preferred.

Throughout the project, the team was in an intensive exchange with stakeholders from business and academia. The final report was presented to a large public audience on 21 March 2017 in Berlin. More information on the study via this [German] press release at The German study features a management summary in English (pp. 22-28).

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Christian Nabe
Energy Systems and Markets
Michael Döring
Energy Systems and Markets
Smart Market Design for German distribution grids (c) Agora 2017