Electricity transmission pricing: The German case

This paper elucidates the German electric power market, especially the electricity transmission pricing system that has been in force since January 2000. This paper points to several distorting pricing features, as well as to grid access problems, and suggests that a regulation office should be established. Moreover, it is argued that an independent grid operator for the entire German grid would enhance its efficient operation, and thereby increase the overall efficiency of the German electric power market. In addition, the actual cost structure and calculation procedure of a German grid operator is described in some detail. Earlier versions of this paper were presented at the Forty-Ninth International Atlantic Economic Conference, March 14–21, 2000, Munich, Germany and the Fifty-First International Atlantic Economic Conference, March 13–20, 2001, Athens, Greece.