Congestion Rent (Engpasserlös) · Glossary

Congestion rent is usually called Engpasserlös in German, more rarely Engpassrente. It refers to the revenue generated in electricity trading between two bidding zones when the available transmission capacity is not sufficient to fully equalise prices. It results from the price difference between the zones and the quantity of electricity actually traded across zones. Technically, it is the market value of the scarce, tradable network capacity between price zones.

A worked example shows the order of magnitude: In bidding zone A, electricity costs 60 euros per megawatt hour, in bidding zone B 90 euros per megawatt hour. The price difference is therefore 30 euros per megawatt hour. If 1,000 megawatts flow from A to B over an interconnector for one hour, that amounts to 1,000 megawatt hours and thus 30,000 euros of congestion rent. The difference in units is important: The line transmits power in megawatts. Only over time does this become an energy quantity in megawatt hours, which is multiplied by the price difference in euros per megawatt hour. Since 1 October 2025, the European day-ahead market coupling has formed prices in 15-minute intervals. For a single quarter-hour, the same values would therefore yield 250 megawatt hours and 7,500 euros. If prices and flow remain the same for a whole hour, the four quarter-hours add up again to 30,000 euros.

Congestion rent is neither electricity generation nor a network charge. It arises from the scarcity of transmission capacity, that is, where trading demands more line capacity than can be released for secure network operation. The scarcity can have various causes: physical line limits, safety margins, operating rules, or the method used to calculate the tradable capacity. In meshed alternating-current networks, it also does not depend on a single line, but on the load flows across the entire interconnected grid. Electricity follows physical paths, not trade contracts.

Distinction from price, network costs and redispatch

Congestion rents are not the same as the electricity price. The price in a bidding zone is the result of supply and demand. A congestion rent arises only from the price difference between zones combined with the limited ability to transmit electricity between them. If prices converge because sufficient capacity is available, no congestion rent, or only a small one, arises at that border.

They also must not be confused with network charges. Network users pay network charges to cover regulated network costs. Congestion rents, by contrast, arise from the allocation of cross-zonal capacity. In the EU they are earmarked and may not be used like ordinary corporate profit. Only under certain conditions may they be used to reduce network charges (see below).

Congestion rents differ clearly from redispatch. In redispatch, the network operator intervenes in the dispatch of power plants, storage or loads in order to manage network congestion during ongoing operation. This incurs costs because plants have to operate differently from what the market had planned. Congestion rents, by contrast, arise from the market-based management of scarce capacity between bidding zones. The two are related but measure different things: congestion rents show the market value of scarce cross-zonal capacity, redispatch costs the expense of technically correcting network situations.

A further distinction concerns producer rents and scarcity prices. If a power plant earns high contribution margins at high market prices, this is not congestion rent in the narrower sense. Congestion rent belongs to network capacity between price zones, not to an individual generation plant. With long-term transmission rights, market participants can hedge against price differences between zones. Their origin nevertheless remains the scarce transmission capacity.

How congestion rents arise in market coupling

In the European electricity market, cross-zonal capacity in the day-ahead timeframe is allocated through market coupling. A common algorithm simultaneously optimises the bids from all participating bidding zones, taking into account the limits of transmission capacity. As long as sufficient capacity is available, prices converge. If a border or a network element becomes a binding constraint, prices remain separate. The difference then shows what value an additional tradable unit of transmission capacity would have in the respective market time interval.

In explicit auctions, market participants pay directly for the right to use capacity at a border. This is common for long-term transmission rights. In implicit allocation, as in day-ahead market coupling, they acquire energy and transmission capacity together. According to the Bundesnetzagentur, capacity at the German borders has been allocated implicitly day-ahead since November 2010. In doing so, the transmission system operators earn revenues from the price difference remaining between the countries after market coupling, and from the remuneration of long-term transmission rights. For market participants, scarcity in the implicit procedure shows up mainly as a price difference between bidding zones.

Simple presentations calculate price difference times exchange at a border. In flow-based market coupling, for example in the Core region, the attribution is more complex. There, not a single border line is considered, but a set of critical network elements on which every trade acts via load flow shares. The total congestion rent then results from the net positions and prices of all participating zones. It is divided among the transmission system operators according to defined distribution rules. At individual borders, trade can even flow from the more expensive to the cheaper zone if this frees up capacity for the overall system on other critical elements. The economic logic remains the same: Scarce network capacity receives a price because it prevents cheaper generation or flexible demand from having a full effect in another zone.

EU legal framework: what congestion rents may be used for

In the EU, Article 19 of the Internal Electricity Market Regulation (EU) 2019/943 governs their use. Revenues may only be obtained from congestion arising in the respective timeframe of capacity allocation. New interconnectors with a regulatory exemption are excluded. Two objectives take priority. First, the actual availability of the allocated capacity is to be ensured, including compensation if committed capacity cannot be delivered. Second, cross-zonal capacity is to be maintained or expanded, for example through coordinated relief measures or through investments in networks that reduce congestion at interconnectors.

Since the 2024 electricity market reform, Regulation (EU) 2024/1747 provides a further purpose of use: compensation for operators of offshore installations generating renewable electricity. It applies when transmission system operators, according to the validated results of the capacity calculation, do not provide the contractually agreed or mandated export capacity. Per year, it is limited to the congestion rents collected at the interconnectors between the bidding zones concerned.
If the priority objectives have been adequately met, remaining revenues may, with the approval of the regulatory authority, be taken into account when determining network charges. Otherwise, they are booked to a separate internal account until they can be used for the intended purpose.
The transmission system operators must determine in advance how they intend to use the revenues and report on the actual use. The details are governed by an ACER methodology (Decision No 38/2020). In Germany, the Bundesnetzagentur publishes an annual report on the amount and use of the revenues.

The year 2022, with its high wholesale prices, shows how large the amounts can be. According to the Bundesnetzagentur, the four German transmission system operators used around 1.4 billion euros in 2022 to ensure the availability of allocated capacity. A further approximately 424 million euros went into maintaining or expanding cross-zonal capacity, and about 1.4 million euros were transferred to a separate account. There was no reduction of network charges from these revenues in 2022. Such values fluctuate strongly with price level, weather and power plant availability.

Why congestion rents matter for the electricity system

Congestion rents make visible that transmission capacity has systemic value. An interconnector does not merely enable physical electricity flows. It links price areas, improves the balancing of generation and demand, and can avoid the dispatch of more expensive plants. When this capacity becomes scarce, its value becomes measurable as congestion rent.

For the assessment of interconnectors and grid expansion, congestion rents are only one part of the calculation. High revenues can indicate that additional capacity would be economically useful. But they can also arise from temporary price differences, for example due to power plant outages, fuel prices, weather conditions or regulatory limits. A new line reduces the price differences it bridges. Falling congestion rents after an expansion can therefore be a success and not a sign of uselessness. The macroeconomic benefit additionally includes the advantages for consumers and producers on both sides.

The concept is also important for the discussion on the configuration of bidding zones. Within a bidding zone, electricity is traded as if there were no internal congestion. Only congestion between zones generates price differences and thus congestion rents. If a congestion persists within a large zone, it shows up not in the price, but usually as a need for redispatch. The market then sees a uniform price, and network operation has to resolve the physical congestion after the fact. Under EU law, bidding zone borders should therefore be aligned with long-term, structural congestion. In addition, cross-zonal capacity may in principle not be reduced in order to resolve internal congestion.

Congestion rents also touch on questions of governance: Who receives the revenues, what may they be used for, and what incentives arise from this? Transmission system operators should not artificially maintain congestion in order to earn revenues. This is why the use is earmarked and monitored by the regulatory authorities. The revenues are also not meant to flow freely into corporate profits, because they arise from a regulated infrastructure whose costs are borne by network users.

Typical misinterpretations

Congestion rents are often interpreted as profit from a technical deficiency. They do arise because of scarce capacity, but they are first of all a mechanism for settlement and distribution in a market with physical limits. Without it, scarce capacity would have to be allocated administratively. Price formation makes visible what value the capacity has in a specific time interval.

Equally wrong is the equation of high congestion rents with a permanently overloaded line. A capacity limit can already be binding when no line is operated at its thermal maximum. The capacity calculation takes into account outage scenarios (the n-1 criterion), voltage and stability limits, and the effect of trade flows on other network elements. The capacity released for trading is therefore not identical to the technical rated capacity of a line.

The claim that congestion rents automatically finance grid expansion also falls short. Their use follows the priority rules mentioned, and a large part may flow into ensuring capacity that has already been allocated. Investments also depend on network planning, permits, cost-benefit assessments, regulation and construction times. Congestion rents are an indicator of scarcity, but do not replace network planning.

In connection with renewable energies, the term is often used too narrowly. Wind and solar power can amplify price differences between zones, for example when a lot of cheap electricity is generated in one region and export capacity is limited. However, congestion rent alone does not explain the cause of the congestion. It measures the market value of scarce transmission in a specific situation. For a root-cause analysis, generation sites, consumption centres, network structure, storage, the power plant fleet and operating rules must be considered together.

Relationship with flexibility and security of supply

Congestion rents are closely linked to flexibility. If flexible consumers, storage or dispatchable generators respond to price differences, they change load flows and price differences. More flexibility in a high-price zone can reduce import needs. In a low-price zone, it can absorb surpluses that, because of limited export capacity, would otherwise fetch only low or even negative prices. As a result, congestion rents can fall even though the electricity system is working more efficiently.

For security of supply, congestion rents are not a direct indicator. A high congestion rent does not mean that electricity is scarce, but that transmission capacity between price zones is scarce. Security of supply additionally depends on available generation, demand, reserves, network stability, fuel supply, forecast quality and operational management. A system can show high congestion rents and nevertheless be operated securely. Conversely, it can show hardly any zonal price differences and still have internal network problems or reserve shortages.

The concept thus describes a specific interface in the electricity system: the link between market prices, transmission capacity and regulatory responsibility. Congestion rent captures neither the entire value of a network nor the total costs of congestion or the quality of electricity supply. It is the monetary expression of scarce tradable network capacity between price zones. Those who place it correctly can see where the market reflects physical network limits and where other instruments are needed, such as grid expansion, redispatch, a different configuration of bidding zones or flexible demand.

Sources

Verordnung (EU) 2019/943 über den Elektrizitätsbinnenmarkt (Neufassung) — Europäische Union, EUR-Lex; 2019-06-05. Art. 19 Abs. 1–5 (Engpasserlöse); Erwägungsgründe zur zonenübergreifenden Kapazität; Art. 14 Abs. 1 (Gebotszonen)
Verordnung (EU) 2024/1747 zur Änderung der Verordnungen (EU) 2019/942 und (EU) 2019/943 (Strommarktdesign) — Europäische Union, EUR-Lex; 2024-06-13. Änderung von Art. 19 Abs. 2 VO (EU) 2019/943 (neuer Buchstabe c) und zugehörige Erwägungsgründe
Erlöse aus grenzüberschreitendem Engpassmanagement im Zeitraum vom 1. Januar 2022 bis 31. Dezember 2022 (Bericht nach Art. 19 Abs. 5 VO (EU) 2019/943) — Bundesnetzagentur; unbekannt (Berichtsjahr 2022). Abschnitt zu den Verwendungszwecken nach Art. 19 Abs. 2 und 3; Verwendungstabelle nach ÜNB
Erlöse aus grenzüberschreitendem Engpassmanagement im Zeitraum vom 01. Januar 2020 bis 31. Dezember 2020 — Bundesnetzagentur; unbekannt (Berichtsjahr 2020). Einleitender Abschnitt zur Kapazitätsvergabe
15 Minute MTU Implemented in SDAC — Nord Pool (für die SDAC-Projektparteien); 2025-10-01. Pressemitteilung, erster Absatz und Abschnitt About SDAC

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Edited by eCMS on 11.11.2026 17:53