Imbalance Price (Electricity Balancing Market)

 


 

 

In the European Union Internal Electricity Market legal framework Imbalance Price is the price in each Imbalance Settlement Period for an Imbalance in each direction.

 

Article 2(2)(o) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)

 

'imbalance price' means the price, be it positive, zero or negative, in each imbalance settlement period for an imbalance in each direction

 

The so-called 'Winter Package' defines an Imbalance Price as the "price, be it positive, zero or negative, in each imbalance settlement period for an imbalance in each direction" (Article 2(2)(o) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)).

 

Interconnected term is an "Imbalance Price Area" which means "the area in which an imbalance price is calculated" (Article 2(2)(p) of the said Proposal of 30 November,bet 2016 for a Regulation on the internal market for electricity).

 

Implementation of the pay-as-cleared method to price Balancing Energy is envisioned, and the marginal pricing has been chosen as the preferred methodology, unless a different pricing method is proven to be more efficient in the long run.

 

An Imbalance Price will be calculated for each direction, these prices may however be the same, thus allowing the possibility of both single pricing and dual pricing (the choice of which is correlated to the length of the Imbalance Settlement Period).

 

After real-time, the TSO charges or pays market participants depending on if they are short (have a shortage of supply vis-à-vis their nomination) or long (have a surplus), respectively. This payment or charge also depends on whether the entire system as a whole is long or short. These payments or charges are known as imbalance settlement prices and are allocated after real-time during the settlement process. Finally, the payments and charges are based on underlying balancing market prices, which in turn provide market participants that bear balancing responsibility with the incentive to have their demand and supply in balance so that overall deviations of the system are minimized. For the TSO this process should be a 'zero-sum' game where he has no financial interest and bears no financial risk.

 

ENTSO-E Network Code on Electricity Balancing, A EURELECTRIC comments paper, August 2013, p. 1

 

 

In order to disincentivise aggravation of the system Imbalance, the Imbalance Price for Imbalances aggravating system Imbalances should at least be related to the average price of Balancing Energy activated within the area.

 

Each Transmission System Operator (TSO) must define rules to calculate the Imbalance Price to be paid by the Balance Responsible Party (BRP) to the TSO or received by Balance Responsible Party from the TSO.

 

The rules shall include a definition of the value of avoided activation of Balancing Energy from Frequency Restoration Reserves (FRR) or Replacement Reserves (RR).

 

Each TSO will determine the Imbalance Price:

(a) for each Imbalance Settlement Period;

(b) for each Imbalance Price Area; and

(c) for each Imbalance direction.

 

The Imbalance Price for shortage must not be less than:

(a) the weighted average price for activated positive Balancing Energy for Frequency Restoration Reserves and Replacement Reserves; or

(b) in the event that no activation of Balancing Energy in either direction has occurred during the Imbalance Settlement Period, the value of the avoided activation of Balancing Energy for Frequency Restoration Reserves or Replacement Reserves.

 

The Imbalance Price for surplus must not be greater than:

(a) the weighted average price for activated negative Balancing Energy for Frequency Restoration Reserves and Replacement Reserves; or

(b) in the event that no activation of Balancing Energy in either direction has occurred during the Imbalance Settlement Period, the value of the avoided activation of Balancing Energy for Frequency Restoration Reserves or Replacement Reserves.

 

Imbalance Settlement Price, in the event that both positive and negative Balancing Energy for Frequency Restoration Reserves or Replacement Reserves have been activated during the same Imbalance Settlement Period, will be determined for shortage and surplus based on at least one of the principles stated above.

 

The Agency for the Cooperation of Energy Regulators (ACER) in its Recommendation No 03/2015 of 20 July 2015 on the Network Code on Electricity Balancing proposes the single price for a positive and negative imbalances should be implemented, with the possibility to use a dual price when a TSO provides the justification that it meets the criteria envisaged in the proposal for harmonisation of imbalance settlement.

 

The aforementioned Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD) stipulates that:

 

- the Imbalances must be settled at a price that reflects the real time value of energy (Article 5(6)),

 

- TSOs are required to publish close to real-time information on the Imbalance Price (as well as on the Balancing Energy price and on the current balancing state of TSO's control areas - Article 5(1).

 

 

 


 

 

 

Documentation

 

 

Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD), Article 2(2)(o)

 

 

 

Add your comment

Your name:
Your website:
Comment:
Last Updated on Friday, 06 January 2017 11:36
 

Search

Twitter
Copyright © 2009 - 2017 Michal Glowacki. All rights reserved.
The materials contained on this website are for general information purposes only and are subject to the disclaimer