Imbalance Settlement (Electricity Balancing Market)




'Imbalance Settlement' is a core element of the Balancing Markets and means a financial settlement mechanism aiming at charging or paying Balance Responsible Parties (BRPs) for their Imbalances for each Imbalance Settlement Period.


The said financial settlement is made with the use of Imbalance Price.


The general principle of Imbalance Settlement is that all injections and all withdrawals should be covered by Balancing responsibility (the rule reinstated by the ACER's Framework Guidelines on Electricity Balancing of 18 September 2012), and, depending on the state of the system, an Imbalance charge is imposed per Imbalance Settlement Period on the BRPs that are not in balance.


It typically aims at recovering the costs of Balancing the system and include incentives for the market to reduce Imbalances – e.g. with references to the wholesale market design – while transferring the financial risk of Imbalances to BRPs.


The Network Code on Electricity Balancing (NC EB) describes the general objectives of Imbalance Settlement, and defines Imbalance Settlement rules that support competition among Market Participants by creating a level-playing field without discrimination.


In respect of the Imbalance Settlement Period, a Cost-Benefit Analysis shall demonstrate whether harmonisation is beneficial and how best to achieve it.


It is also noteworthy that renewable energy sources will be made by the Network Code on Electricity Balancing financially responsible for their Imbalances (see ACER's Opinion No 07/2014 of 21 March 2014 on ENTSO-E Network Code on Electricity Balancing).


Technically, pursuant to the ENTSO-E Final Supporting Document for the Network Code on Electricity Balancing (see the version of 6 August 2014the Imbalance Settlement is done as follows. 


The sum of the trades of a BRP (buy and sell) to others should match the net energy infeed/withdrawal over the connections for which the BRP carries responsibility. In order to assess this, the following volumes are therefore defined:


1) A notified Position (scheduled position) reflecting the final net volume of commercial transactions on all timescales on organised markets or between BRP's, or where appropriate the scheduled injections and withdrawals.


2) An allocated value (usually based on metered values or profiled values), reflecting the net volume of realized physical generation and consumption over the connections for which the BRP is responsible.


3) An adjusted volume reflecting the Activation of Balancing Energy bids associated with this BRP, at least at Balancing Energy bid level.


For BRPs that do not cover any injections or withdrawals (as a pure trader could be) the step to calculate the Allocated Volume is not needed, as this volume will be zero by definition.


For simplicity purposes, the the NC EB states that the Allocated Volume for this kind of BRP shall not be calculated (which would be effectively the same as saying that this volume is zero).


The draft Network Code included in Annex II of the Agency Recommendation on the Network Code on Electricity Balancing states that "the imbalance settlement principles shall ensure that imbalances are settled at a price that reflects the real-time value of energy".


However, it also envisages the possibility that Transmission System Operators (TSOs) develop a proposal for an additional settlement mechanism in order to ensure that the charges for BRPs reflect the full costs of Balancing.


ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015p. 211 argues that if the costs of Balancing and congestion management are not properly disentangled, this is likely to distort the cost reflectivity of Imbalance charges. 




According to the said ACER's Report of November 2015 some other elements may also impede Imbalance charges reflecting the flexibility value adequately. The example referred to is the procurement of Balancing Services combined with re-dispatching measures to relieve internal congestion (e.g. in Italy, Great Britain and Poland).


The aforementioned ACER's Report of November 2015 evidences the fact, Imbalance Settlement mechanisms in the EU Member States are heterogenous, the effect of this are different Imbalance charges in different markets. When the cross-border trade in Balancing Services becomes more frequent, the lack of harmonisation in the settlement of Imbalance charges may reduce the efficiency of Balancing Markets' integration. This is because BRPs would be facing different price incentives according to their location.


As stated in the ACER's Recommendation on the Network Code on Electricity Balancing all TSOs must develop a proposal for harmonising the main features of Imbalance Settlement.




Last Updated on Sunday, 01 January 2017 23:20


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