Benefits of regional balancing areas

Abstract

The European power system is transforming rapidly to integrate more renewables, develop flexibility and enable consumers to play a more central role. For electricity markets, this transition means that trading needs to move closer to real time while respecting system security. As the system is changing, the more efficient balancing of the power system also needs to be developed. This paper provides an analysis of operation of common balancing area based on a case study of the Baltic common balancing energy market model which was launched as from 1st of January 2018. The objectives of development of the common Baltic balancing market were to increase balancing efficiency, to increase availability of balancing resources and to reduce the costs of power system balancing. Establishing the common Baltic balancing market required harmonization of balancing market frameworks of the three Baltic States including the settlement rules between market parties, introduction of a coordinated balance control on a regional level and introduction of common balancing IT platform. This paper analyses operational indicators assessing the performance of the new balancing system, including changes in area control error, changes in market liquidity and diversity, changes in balancing costs for market participants. Paper also analyses changes in balancing energy price dynamics in the Baltic States, including price volatility and price correlation to understand how imbalance prices could motivate balance steering of the balance responsible parties. Proposals for further balancing market model development are also provided in the paper.