From Portfolio to Precision: Examining the Transition to Multi-Part Bids in European Electricity Markets

Abstract

The transition to a decarbonized electricity system in Germany requires fundamental changes in market design to efficiently integrate renewable energy sources (RES) while maintaining grid stability and cost efficiency. This thesis examines the potential adoption of multi-part bids (MPBs) at the unit level and explores how they could improve market efficiency, congestion management, and investment signals compared to Germany’s current portfolio-based bidding system. Through a comparative case study of Italy, which has successfully implemented unit-based MPBs and locational price elements, this research assesses the feasibility of similar reforms in the German electricity market. Germany’s existing bidding structure, based on a single national price zone and ex-post redispatch, has led to high congestion costs, inefficient price signals, and suboptimal investment decisions. In contrast, Italy’s multi-part bidding framework, integrated with zonal pricing and real-time dispatch mechanisms, enables more transparent cost allocation, reduced redispatch needs, and stronger locational incentives for generation and flexibility assets. The case study highlights key structural differences, including grid topology, regulatory frameworks, and stakeholder adaptation, which influence the applicability of Italy’s model to Germany. To facilitate a transition, this thesis outlines a phased implementation roadmap tailored to Germany’s market conditions. In the short term, pilot programs in congestion-prone regions could test the feasibility of MPBs, while imbalance pricing reforms could improve cost allocation. In the medium term, increasing intraday market liquidity and introducing dynamic bidding zones would enhance flexibility. In the long term, a gradual shift toward locational price signals and real-time market integration could improve market efficiency while balancing stakeholder concerns. This research contributes to the literature on electricity market design and congestion management by analyzing how specific characteristics of national market structures—such as the level of generation centralization, grid topology, and existing bidding formats—influence the effectiveness and feasibility of bidding reforms. The findings suggest that implementing multi-part bids in Germany could significantly reduce redispatch costs, improve market transparency, and support more efficient investment signals. However, the success of such a transition depends on regulatory adjustments, IT infrastructure upgrades, and stakeholder coordination. Future research should incorporate quantitative modeling, political feasibility assessments, and consumer impact analyses to further refine implementation strategies. By learning from Italy’s experience, Germany can modernize its market design, ensuring a more cost-effective, flexible, and resilient electricity system aligned with European decarbonization goals.