Against this backdrop, policymakers and the energy sector are increasingly challenged to use electricity more efficiently at a regional level and to integrate new demand – especially from hydrogen production – into the system in a grid-friendly and market-oriented manner. The study results provide a sound basis for discussions on more differentiated electricity price zone configurations in the future.

New price zone as a lever for efficiency and integration

At the center of the scenario analysis is an alternative electricity price zone configuration: the NordicTwinSeaZone, consisting of Schleswig-Holstein, Hamburg and Western Denmark, and a second zone for the rest of Germany (DE2). The analysis examines electricity prices, market values of renewable energy, curtailment of wind and PV, and the economic viability of electrolyzers in the scenario year 2030.

The results show that the NTSZ leads to lower electricity prices in the northern region while simultaneously providing clear signals for additional flexible demand. Without additional electrolysis capacity, prices decrease, but the market values of wind and PV also decline. This creates strong economic incentives for new flexible consumers in the region. “Using renewable electricity where it is generated reduces curtailment, stabilizes the market and increases security of supply – this is exactly where the NordicTwinSeaZone comes in,” says Felix Frischmuth, Project Manager at Fraunhofer IEE.

Electrolysis as a systemic key

The advantages become particularly evident with additional expansion of electrolysis capacity in the northern zone. Even with an expansion of around 3 gigawatts, the simulations show significant system effects: curtailment of renewable energy decreases markedly, negative electricity prices are reduced by around one third, and the market values of wind and PV increase by several tens of percent. At the same time, electricity price levels and market values for wind and PV between the NTSZ and the rest of Germany converge significantly as electrolysis capacity increases. Electrolyzers benefit from improved operating conditions, particularly if they respond flexibly to price signals in line with the requirements of the RED III Directive.

A cost-optimized mode of operation – for example, with a price limit of €60 per megawatt-hour for electricity consumption – preserves key system benefits: it reduces operation in high-price hours while contributing to the stabilization of the electricity market.

“The results show that a more market-based representation of grid bottlenecks and targeted expansion of electrolysis in the northern zone can go hand in hand – with benefits for costs, the integration of renewable energy and the hydrogen ramp-up,” explains Norman Gerhardt, Head of the Energy Economics and System Analysis Division at Fraunhofer IEE.

Contribution to hydrogen strategy and energy sovereignty

A central finding of the study is the improved economic viability of hydrogen production in the NTSZ. By meeting the RED III 90% criterion, electrolyzers can be operated competitively and achieve high full-load hours. This enables the production of green hydrogen at predictable costs and supports the development of German and European hydrogen markets.

In addition, the regional coupling of renewable electricity generation and hydrogen demand makes an important contribution to system stability and to reducing redispatch measures. At the same time, it strengthens German and European energy sovereignty by lowering dependency on energy imports and fostering regional value chains.

Basis for future market design

The short study shows that a more differentiated electricity price zone configuration can unlock significant efficiency potential within the energy system. The NordicTwinSeaZone links renewable generation, flexible demand and market mechanisms across national borders and addresses key challenges of the energy transition – from grid bottlenecks and price volatility to the integration of new technologies.