Market design
Imbalance Price Settlement
Project name: Further development of the German Imbalance Price
Commissioned by: German TSOs
Timeframe: 2019 – 2020
Contact: Andreas Cronenberg
Schematischer Verlauf der Knappheitskomponente [1]
The balancing group and imbalance price settlement play a decisive role in the secure functioning of the electricity system and ensuring system security.
Participation in the electricity market takes place via balancing groups, whereby the balancing group managers are obliged to balance feed-ins and withdrawals in their balancing group within every quarter of an hour. Smaller shortfalls are unavoidable in practice, for example due to deviations from forecasts or unexpected events such as the failure of generation plants. As balance coordinators, the transmission system operators provide balancing energy for these shortfalls, which is billed at the The determination of the imbalance price settlement is of great importance for the smooth functioning of the electricity system.
On the one hand, the imbalance price settlement must provide incentives for balancing group managers to avoid large, potentially system-destabilising balance deviations. On the other hand, the imbalance price settlement should not be unnecessarily high in order to avoid unduly penalising balance imbalances that are unavoidable but not critical from a system perspective, thereby making it more difficult for new players to enter the market, for example.
After very high imbalances that jeopardised system security occurred on several days during 2019 due to false incentives in the existing imbalance price settlement, Consentec supported the German TSOs in two projects to further develop the imbalance price settlement in accordance with the EU guideline on Electricity Balancing.
The introduction of an were proposed and parameterised as key improvements. The incentive component ensures that, from the perspective of balancing group managers, the compensation of recognised imbalances in their own balancing group that are system-destabilising by trading activities on the short-term intraday markets is always advantageous compared to the procurement of balancing energy. The scarcity component ensures a minimum imbalance price that depends on the system imbalance in the German control areas (GCC) and, in particular, ensures that there are sufficient economic incentives for neutral or system-stabilising behaviour of the balancing groups in the event of high system imbalances.
Our support for the TSOs also included assistance in drafting a supporting document and supporting the consultation of market participants.
The supporting document on the introduction of the scarcity component is available here.