Balancing Capacity
European Union Electricity Market Glossary

 


 

 

Balancing Capacity is a type of Balancing Services where the reserve capacity is contracted (see, in particular, Frequency Containment Reserve, Frequency Restoration Reserve, Replacement Reserve).

 

 

Article 2(2)(l) 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)

 

'balancing capacity' means a volume of capacity that a balancing service provider has agreed to hold to and in respect to which the balancing service provider has agreed to submit bids for a corresponding volume of balancing energy to the transmission system operator for the duration of the contract

 

The so-called 'Winter Package' defined Balancing Capacity as a volume of capacity that a Balancing Service Provider (BSP) has agreed to hold to and in respect to which the BSP has agreed to submit bids for a corresponding volume of Balancing Energy to the Transmission System Operator (TSO) for the duration of the contract (Article 2(2)(l) 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)).

 

The same aspects of the definition of the Balancing Capacity were earlier highlighted in the ACER's Recommendation No 03/2015 of 20 July 2015 on the Network Code on Electricity Balancing.

 

The procurement of Balancing Capacity should be understood as only one option that guarantees that BSPs with a Balancing Capacity contract will always submit the required volume of Balancing Energy bids to TSOs.

 

In order to reduce the amount of procured Balancing Capacity TSOs should take into account, inter alia, the possibility of collecting Balancing Energy bids from BSPs without a Balancing Capacity contract (see: ACER Opinion No 07/2014 of 21 March 2014 on ENTSO-E Network Code on Electricity Balancing).

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015 (p. 210) recommended that the procurement costs of Balancing Capacity could be optimised by separate procurement of upward and downward Balancing Capacity and shorter procurement timeframes.

 

According to the ACER, any distorting impact of reserve procurement on energy price formation should be minimised.

 

The said ACER's Report of November 2015 also observes in a majority of EU Member States the largest share of balancing costs is made up by the procurement costs of Balancing Capacity.

 

These are not charged directly to Balance Responsible Parties (BRPs) through Imbalance Prices, but are normally socialised, typically through the network tariffs.

 

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) in Article 5(7) - (9) stipulates that:

 

- the dimensioning of reserve capacity and the amount of Balancing Capacity that needs to be procured must be carried out on a regional level in accordance with points 7 and 8 of Annex I to the said Proposal for a Regulation (see box), 

 

- the procurement of Balancing Capacity must be performed on a regional level in accordance with point 8 of Annex I to the said Proposal for a Regulation, and based on a primary market and organised in such a way as to be non-discriminatory between market participants in the prequalification process individually or through aggregation,

 

- the procurement of upward Balancing Capacity and downward Balancing Capacity must be carried out separately (which represents the implementation of the recommendation contained in the aforementioned ACER/CEER Annual Report of November 2015),

 

- the contracting for the Balancing Capacity must be performed for not longer than one day before the provision of the Balancing Capacity and the contracting period must have a maximum period of one day.

 

The aforementioned point 8 of Annex I to the said Proposal for a Regulation provides for the facilitation of the regional procurement of Balancing Capacity with the use of newly established entities called regional operational centres (ROCs).

  

 

Annex I to 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), point 7

 

7. Regional sizing of reserve capacity

 

7.1. Regional operational centres shall determine the reserve capacity requirements for the system operation region. The determination of reserve capacity requirements shall:

(a) pursue the general objective to maintain operational security in the most cost effective manner;

(b) be performed at the day-ahead and/or intraday timeframe;

(c) determine the overall amount of required reserve capacity for the system operation region;
(d) define minimum reserve capacity requirements for each type of reserve capacity;

(e) take into account possible substitutions between different types of reserve capacity with the aim to minimise the costs of procurement;

(f) set out the necessary requirements for the geographical distribution of required reserve capacity, if any.

 

The tasks entrusted to ROCs include, among others, supporting the TSOs of the system operation region in determining the amount of Balancing Capacity that needs to be procured.

 

In accordance with the said rules, the determination of the amount of Balancing Bapacity must:

(a) be performed at the day-ahead and/or intraday timeframe;

(b) take into account possible substitutions between different types of reserve capacity with the aim to minimise the costs of procurement;

(c) take into account the volumes of required reserve capacity that are expected to be provided by balancing energy bids, which are not submitted based on a contract for Balancing Capacity.

 

Regional operational centres are also envisioned to support the TSOs of the system operation region in procuring the required amount of Balancing Capacity. The procurement of Balancing Capacity must:
(a) be performed at the day-ahead and/or intraday timeframe;
(b) take into account possible substitutions between different types of reserve capacity with the aim to minimise the costs of procurement.

 

 

 


 

 

 



Last Updated on Saturday, 04 February 2017 10:15
 

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