ENTSO-E published the "Bidding Zone Review of the 2025 Target Year" in April 2025, a report that collects the analysis done by European Transmission System Operators (TSOs) who compared the current and alternative bidding zones. This emerged after ACER's decision no. 11/2022 on the consideration of alternative bidding zone configurations to be included in the bidding zone review.
As part of this process, European TSOs analyzed a total of 14 bidding zones across Central and Northern Europe. TSOs must recommend to maintain the current bidding zone configuration or suggest a new one with higher monetized benefits or one among the “acceptable” ones as long as they can justify why is that one preferable. Following the publication of the Bidding Zone Review, Member States have six months to decide whether to revise the current zone delineations.
What are bidding zones and how are these defined?
Bidding zones play a crucial role in electricity markets by enabling trading at uniform prices within defined geographic areas—typically aligned with national borders. The primary purpose is to enhance economic efficiency, facilitate cross-border electricity trading, and support the security of supply.
Central Europe and Nordic bidding zones
In the case of Central Europe bidding zone, the simulation results indicate that the configuration with the highest positive monetized benefit would be the split of Germany/Luxembourg into 5 bidding zones (DE5) compared to the current status quo. This configuration results derive in an estimated monetized benefit of 339€ million for the 2025 target year, according to ENTSO-E.
The simulated results from the Nordic bidding zones study reflect that none of the configurations assessed perform better than the status quo, thereby recommending to maintain the current bidding zones configuration.
When determining bidding zones, the overall economic efficiency, social welfare, market liquidity, transition costs, and the ability to maintain operational security of the grid are analyzed.
Capacity allocation and congestion management
Notwithstanding that, there are a few factors that need to be considered, for example, it should be ensured that electricity prices and costs do not have an excessive economic impact, that there are no obstacles for consumers to access renewable electricity in the newly created bidding zones, that there are no negative implications on market liquidity nor transaction costs which could affect markets and their participants. Last but not least, the new suggestions shouldn't have an negative impact on balancing markets nor certain types of renewable energy sources. Likewise, producers located in lower priced balancing zones with guaranteed feed-in-tariffs may have to receive higher compensation for their electricity generation.
