Joint northern German-Danish power price zone could boost hydrogen competitiveness – analysis
Clean Energy Wire
A joint power price zone covering northern Germany and western Denmark could reduce energy transition costs, make green hydrogen more competitive and strengthen German industry, according to an analysis by research institute Fraunhofer IEE for the Chamber of Industry and Commerce (IHK) and the state government of Schleswig-Holstein. A so-called Nordic Twin Sea Zone (NTSZ) for electricity that links the northern German state with the neighbouring city of Hamburg and parts of Denmark across the border would make the energy system more efficient and allow cost savings especially regarding green hydrogen production, the researchers found.
Germany currently has a single wholesale power price zone, meaning electricity costs the same on the exchange across the country, no matter how congested the grid is between the windy north and the industrial south. The federal government has repeatedly rejected calls for splitting the zone into two or more areas, and politicians and industry in the southern states fear a split would turn their regions into high-price zones.
“The NTSZ shows the potential that lies in better coordination of renewable power generation, grids and flexible demand,” said co-author Martin Braun of Fraunhofer IEE. Regional power prices and a flexible use of electrolysers for hydrogen production could improve the integration of renewable energy sources and reduce curtailment, the switching off of wind and solar PV installations when the grid cannot absorb more electricity, Braun said. Decisions on where to build electrolysers also have effects across national borders, he added: “We therefore must consider electricity market design, the hydrogen ramp-up and industrial value creation together at European level.”
The researchers compared the NTSZ with scenarios in which one gigawatt (GW) of additional electrolysis capacity is built in neighbouring Austria or Denmark while Germany keeps its single price zone. “The results show that additional expansion of electrolysis capacity under today’s power market design increases the costs for German consumers,” IHK said.
The analysis found that one additional GW of electrolysis capacity in Austria raises Germany’s power price by around 0.6 euros per megawatt hour (MWh), while the same expansion in Denmark increases the price by 0.5 euros. In the NTSZ scenario, the increase was only around 0.2 euros per MWh. “A regional pricing zone could deliver electrolysis capacity expansion at much lower costs and at the same time improve the conditions for a competitive production of green hydrogen,” IHK said. However, the price effects are small compared with Germany’s average wholesale power price, which stood at 89.32 euros per MWh in 2025.
IHK Schleswig-Holstein chief executive Björn Ipsen said the energy transition’s success would not be decided by the expansion of renewable energy sources alone, an area in which both the northern German state and neighbouring Denmark are leaders thanks to their large wind turbine fleets. “What matters is whether we succeed in turning renewable power into value creation in the places where it is available in large quantities,” Ipsen said.
Referring to the controversial debate about splitting Germany’s single power price zone, Schleswig-Holstein’s energy transition state secretary Joschka Knuth said that the current market design “is distorting power prices across Germany” by “signalling abundance where there is scarcity and vice versa.” These inefficiencies prevent energy transition pioneer regions like Schleswig-Holstein from fully exploiting their advantages, Knuth argued. “At the same time, all of Germany – and especially the industry-heavy southern states – could benefit from hydrogen made in Germany,” he added, calling for the implementation of a “modern and market-oriented price zone model.”