The rapid expansion of renewable generation is increasing the operational importance of internal transmission congestion in European electricity systems. In Germany, large shares of wind generation in the north and major demand centres in the south create persistent grid bottlenecks that are not fully reflected under the current zonal market design. As a result, congestion is often managed with after-market clearing through redispatch and renewable curtailment, increasing system costs and weakening locational signals for generation, demand, and flexibility.

This study evaluates how alternative market designs and planned transmission reinforcement affect congestion management in Germany. Using an hourly DC optimal power flow model for the full year 2020, built with the open-source PyPSA-Eur framework, we compare four scenarios: zonal pricing with ex post redispatch, nodal pricing, zonal pricing with reinforced grid topology, and nodal pricing with reinforced grid topology. The model represents Germany and its neighbouring trading partners at transmission level, includes cross-border electricity exchange, and distinguishes between the existing 2020 network and a reinforced future topology based on planned transmission expansion.

The results show that nodal pricing substantially reduces German operating costs compared with zonal pricing followed by redispatch. In the base grid, German operating costs decrease from €12.10 billion under zonal pricing with redispatch to €8.94 billion under nodal pricing. With grid reinforcement, costs decrease from €11.33 billion to €8.96 billion. Grid reinforcement also reduces redispatch requirements under the zonal design, lowering gross redispatch from 351.8 TWh to 284.1 TWh and net redispatch cost from €1.59 billion to €0.53 billion. Renewable curtailment follows a similar trend: curtailment falls from 26.44 TWh under the base zonal case to 10.80 TWh under nodal pricing, and is almost eliminated when nodal pricing is combined with grid reinforcement.

These findings highlight that both transmission expansion and market design are essential for integrating high shares of renewable energy. While grid reinforcement mitigates physical bottlenecks, nodal pricing addresses the underlying market inefficiency by internalising network constraints directly in dispatch and price formation. The study contributes to ongoing European discussions on bidding-zone configuration, congestion management, renewable integration, and market arrangements for renewable-dominated power systems.