The imbalance market

The electricity balancing market in the Netherlands is a crucial component of the energy system. It is designed to maintain a constant balance between electricity supply and demand. In an ideal situation, supply and demand would always be perfectly aligned, but in practice, these factors fluctuate constantly. The imbalance market acts as a mechanism to absorb these fluctuations with the help of Balance Responsible Parties (BRPs). Read here to find out how it works.

Accounting Manager

With the exception of small consumers, you are personally responsible for balancing your electricity supply and demand. As a large consumer, you can apply to become a Balancing Responsible Party (BRP) yourself. However, this role is usually outsourced to a professional BRP. Such a BRP has at least one, but often several, electricity connections in its portfolio.

Prediction versus reality

As a BRP, you are financially responsible for balancing the consumption and generation of these connections. This balance is tracked on a 15-minute basis. This period is called the Imbalance Settlement Period (ISP). Each BRP makes a forecast for its portfolio: the forecast for generation and consumption. This forecast is submitted to TenneT. If actual consumption deviates from the forecasts, imbalance costs are incurred. If you are the party responsible for this imbalance, you are required to pay a fee. The purpose of this “penalty” is to encourage market participants to make accurate forecasts and align their activities with actual demand, thereby minimizing imbalances. This contributes to a reliable energy supply.

Encourage

The imbalance price is what balancing parties must pay TenneT for deviating from their portfolio forecasts. These forecast deviations cause imbalances in the overall system balance. The imbalance price is (usually) equal to the balancing energy price (aFRR). Passive balancing, as it is called, is possible because BRPs have access to live updates on the volumes and prices of active balancing energy. 

This “game” works both ways. On the one hand, BRPs are incentivized to make accurate forecasts and thus avoid causing an imbalance. On the other hand, TenneT provides financial incentives for BRPs to deviate from their portfolio, as long as this reduces the system’s overall imbalance. In practice, this means that BRPs can also deliberately create an imbalance within their own portfolio, as long as it offsets the system imbalance. For this deliberate portfolio imbalance, you actually receive the imbalance price.

Balancing energy

Consumers therefore have a responsibility to contribute as much as possible to maintaining the balance on our energy grid. However, it is inevitable that forecasts will differ from reality. For this reason, it is important to have flexible capacity on standby. Flexible capacity means that you can adjust the consumption or generation of assets on demand.

Battery storage is a very logical solution for this. But solar, wind, or even a flexible production process can also be used for this purpose. When such an unforeseen imbalance occurs, TenneT can call on this flexible capacity. A Balancing Service Provider (BSP) can offer this balancing energy. You grant TenneT access to your generation or consumption facility, allowing it to be automatically and quickly activated in the event of an imbalance. This is how the imbalance on the grid is mitigated.