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Electricity Balancing
European Union Electricity Market Glossary

 

 

 

Electricity balancing encompasses all actions and processes, on all timelines, through which Transmission System Operators (TSOs) ensure, in a continuous way, the system frequency is within a predefined stability range as set forth in the Network Code on System Operation, and complies with the amount of reserves needed per:

 

- Frequency Containment Process,

 

 

Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, Article 2(1)

 

‘balancing’ means all actions and processes, on all timelines, through which TSOs ensure, in a continuous way, the maintenance of system frequency within a predefined stability range as set out in Article 127 of Regulation (EU) 2017/1485, and compliance with the amount of reserves needed with respect to the required quality, as set out in Part IV Title V, Title VI and Title VII of Regulation (EU) 2017/1485

 

Frequency Restoration Process, and

 

Reserve Replacement Process,

 

with respect to the required quality.

 

Also the 'Winter Energy Package' defines balancing as 'all actions and processes, in all timelines, through which transmission system operators ensure, in a continuous way, maintenance of the system frequency within a predefined stability range and compliance with the amount of reserves needed with respect to the required quality' (Article 2(2)(i) 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)).

 

In turn, the Commission Staff Working Document accompanying the document Commission Regulation of 23.11.2017 establishing a guideline on electricity balancing ({SWD(2017) 383 final}, p. 3) understands the balancing as ‘the situation after markets have closed (gate closure) in which a TSO acts to ensure that demand is equal to supply, in and near real time’.

 

The said Commission Staff Working Document further explains (p. 7) that electricity balancing covers all actions performed by a TSO to ensure that total electricity demand is equal to ('in balance with') total electricity supply at any given moment.

 

Also the EU electricity market regulators understand the essence of the electricity system balancing in the same way (those actions and processes performed by a TSO in order to ensure that total electricity withdrawals (including losses) equal total injections in a control area at any given moment (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015p. 204)).

 

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Commission Staff Working Document accompanying the document Commission Regulation of 23.11.2017 establishing a guideline on electricity balancing {SWD(2017) 383 final}, p. 14

 

The concept of balancing in electricity

 

Balancing refers to the situation after markets have closed ('gate closure') in which a TSO acts to ensure that demand is equal to supply. A number of stakeholders are responsible for organising the electricity balancing market:

 

- TSOs keep the overall supply and demand in balance in physical terms at any given point in time. This balance guarantees the secure operation of the electricity grid at a constant frequency of 50 Hertz. 

 

- Balance responsible parties ('BRPs') such as producers and suppliers; keep their individual supply and demand in balance in commercial terms. Achieving this requires the development of well-functioning and liquid markets. BRPs need to be able to trade via forward markets and at the day-ahead stage. They also need to be able to fine-tune their position in the same trading day (e.g. when wind forecasts or market positions change). 

 

- Balancing service providers ('BSPs') such as generators or demand facilities, balance out unforeseen fluctuations on the electricity grid by rapidly increasing or reducing their power output. BSPs receive a capacity payment for being available when markets have closed ('balancing capacity') and an energy payment when activated by the TSO in the balancing market ('balancing energy'). Payments for balancing capacity are often socialized via the transmission network tariffs, whereas payments for balancing energy usually shape the price that BRPs who are out of balance have to pay ('imbalance price').

 

The liberalisation of the electricity market introduced the concept of balancing as a competitive market, where the demand and supply for balancing services are met. Thus, the balancing market is characterised by the two core components: the procurement of balancing services and the settlement of imbalances...

  

Balancing, being simultaneously performed in all control areas and between control areas, contributes to ensuring stability in a synchronous area.

 

Balancing mechanisms are not only technical arrangements set out to ensure system stability but also have implications on competition as procuring balancing services normally entails commercial arrangements with imbalances levied on the market through settlement mechanisms.

 

Balancing is thus essential to ensuring the well functioning of wholesale electricity markets, given its bearing on system security of supply.

 

According to Article 15(1) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, Distributon System Operators (DSOs), TSOs, balancing service providers (BSPs) and balance responsible parties (BRPs) are required to cooperate in order to ensure efficient and effective balancing.

 

 

Balancing Costs

 

 

The overall costs of balancing can be calculated as the procurement costs of balancing capacity and the costs for activating balancing energy (based on the activated energy volumes and the prices of the different products).

 

As the above ACER's Report of November 2015 evidences (p. 209) there are large disparities in balancing costs across the EU Member States.

 

The reasons for this depend on both the volumes of balancing capacity and balancing energy procured and their prices.

 

The level of the volumes required in different EU Member States are often dependent on obvious factors, such as the penetration level of renewable-based generation, or less evident factors, such as the efficient dimensioning of balancing reserves by TSOs.

 

For example, relatively smaller systems are likely to require a larger amount of reserves in relation to demand, due to the application of the N-1 criteria in the dimensioning of the reserves.

 

The prices of balancing services also depend on many other factors, such as the underlying costs of the available resources to provide fexibility and the level of competition in the markets. 

 

The overall balancing services' procurement costs are normally transferred to end-consumers, partly through imbalance charges to BRPs and partly socialised in the network charges.

 

Imbalance charges represent the effective prices that out-of-balance BRPs pay (or receive) for deviations from their schedules.

 

They should ensure that BRPs are incentivised to keep and/or help restore system balance in an efficient and cost-reflective way.

 

In most cases, imbalance charges cover the costs of activated balancing energy and a negligible or small share of the balancing capacity procurement costs.

 

However, in competitive retail markets, it should be expected that less efficient BRPs are not able to transfer all their imbalance charges to their consumers (ACER's Report of November 2015, p. 210).

 

  

 

 

IMG 0744

    Documentation    

 

 

 

 

  

Electricity Balancing Network Code, Article 2(1)

 

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)(i)

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015p. 204

 

 

 

 

 

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Last Updated on Monday, 08 January 2018 13:04
 

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