Balancing Services (Electricity Balancing Market)
The term: ”balancing services” stands for either or both balancing capacity and balancing energy (Article 2(3) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing).
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The study showcases some practices that could be considered by TSOs to improve and simplify the product prequalification process for new and small market participants, including demand response:
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Balancing services are also defined in Article 2(11) of Commission Implementing Regulation No 1348/2014 of 17 December 2014 on data reporting implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency for the purposes of REMIT reporting where they mean:
- for electricity: either or both balancing capacity and balancing energy;
- for natural gas: a service provided to a TSO via a contract for gas required to meet short term fluctuations in gas demand or supply.
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Balancing capacity markets are in place to make up for lost opportunities of Balancing Service Providers in the day-ahead market and intraday market.
Balancing energy bidding with a short gate closure time are to ensure that these bids only include the marginal cost of providing balancing energy and only include opportunity cost for the balancing market.
ACER Decision No 03/2022 of 25 February 2022 on the amendment to the methodology for pricing balancing energy and cross-zonal capacity used for the exchange of balancing energy or operating the imbalance netting process.
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According to Article 14(1) of the said Commission Regulation (EU) 2017/2195 of 23 November 2017 each Transmission System Operator (TSO) is responsible for procuring balancing services from balancing service providers (BSPs) in order to ensure operational security. By drawing on balancing services TSO maintain the system frequency within predefined stability limits (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015, p. 204).
Article 45(5) of the Harmonised allocation rules for long‐term transmission rights (HAR), as established in the Annex to the Decision of the Agency for the Cooperation of Energy Operators (ACER) No 03/2017 of 2 October 2017, stipulates that in case the holder of Physical Transmission Rights (PTRs) reserves its PTRs for the balancing services, such cross-zonal capacity is excluded from the application of the remuneration processes.
Rules for the procurement of balancing services
Annual Report of the ACER and CEER on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 (Electricity Wholesale Markets Volume) published in October 2017 observes (p. 49) that the procurement scheme of the different services is one of the aspects of balancing markets design that differs significantly across EU Member States. While in some countries these schemes are essentially market-based, in others the procurement of balancing services are still carried out, to varying degrees, in a regulated manner.
The balancing services' procurement is sometimes preceded by the pre-qualifcation stage where a TSO test and validate the capacities of potential BSPs. It is noteworthy, in the Study of 21 December 2022 the ACER highlighted the scope for grid operators to simplify their prequalification processes to enable small-scale demand response to provide balancing services. The practices that could be considered by TSOs to improve and simplify the product prequalification process for new and small market participants, including demand response, are:
- setting a product prequalification for groups aggregating any type of technology;
- setting a threshold for re-prequalification only after significant changes in prequalified units or groups;
- using type-approval for small units;
- verifying the compliance of assets to technical requirements during the service delivery rather than before.
TSOs can secure balancing services by means of both contracted and non-contracted services delivered by BSPs over different timescales (Commission Staff Working Document, Impact Assessment of 23.11.2017 accompanying the document Commission Regulation establishing a guideline on electricity balancing {SWD(2017) 383 final}, p. 15).
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TSOs are prohibited from offering balancing services themselves, except if their purpose is uniquely for system seecurity or if there are insufficient bids. This is to ensure a fair, transparent and non-discriminatory approach.
Article 40(4) of the Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity ((recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)) envisages that in performing the tasks of procuring ancillary services from market participants the transmission system operator must ensure that the procurement of balancing services is:
(a) transparent, non-discriminatory and market-based;
(b) ensures effective participation of all market participants including renewable energy sources, demand response, energy storage facilities and aggregators, in particular by requiring regulatory authorities or transmission system operators in close cooperation with all market participants, to define technical modalities for participation in these markets on the basis of the technical requirements of these markets and the capabilities of all market participants.
Demand response balancing services under the REMIT reporting
Contracts involving a customer providing demand response balancing services to a TSO are reportable under REMIT upon reasoned request of the ACER and on an ad-hoc basis (Article 4(1)(d) and Articles 2(9) and 2(11) of Commission Implementing Regulation (EU) No 1348/2014, ACER's Questions and Answers on REMIT, Question II.4.52).
It is noteworthy, this rule does not apply to contracts involving a customer providing demand response services to a supplier and/or an aggregator - such contracts must be reported under REMIT on a continuous basis (Article 3(1)(a)(ii) of the said Commission Implementing Regulation No 1348/2014).