The imbalance market: what is it and how does trading work?

What is the imbalance market?

The imbalance market is one of the most important balancing markets within the Dutch energy system. Because electricity cannot be stored on the power grid itself, production and consumption must be exactly in balance at all times.

If this balance is disturbed, for example by unexpectedly more or less demand or by fluctuations in solar and wind production, an imbalance occurs. A surplus of electricity can overload the grid and damage equipment; a deficiency can lead to voltage drops and eventual failure.

To prevent this, TenneT continuously makes adjustments. On the imbalance market, the grid operator publishes an imbalance price that encourages companies to help restore the grid. Anyone who can supply or purchase electricity at the right time receives compensation.

Anyone who deviates from their predicted production or consumption and cannot manage this intelligently will be charged via their BRP at the imbalance price. In practice, parties without automated management bear the costs of parties that can use their assets flexibly.

How does an imbalance arise on the electricity grid?

Imbalance occurs when actual production and consumption deviate from what energy producers and suppliers have estimated in advance. Because electricity must be used immediately when it is generated, the system is extremely sensitive to unexpected peaks or valleys.

Fluctuations in solar and wind production, changes in industrial loads, disruptions or unpredictable consumer behavior can all lead to a difference between planning and reality. As soon as the balance changes, the grid frequency comes under pressure and TenneT must intervene to keep the system stable.

Positive imbalance (too much electricity)

There is more production than consumption, with the result:

• The grid frequency rises and the grid becomes overloaded.
• Producers must scale back or switch off (partially).
• Customers are actually encouraged to use more electricity.

Negative imbalance (too little electricity)

Consumption is higher than the amount of electricity generated, resulting in:

• The grid frequency drops towards the lower limit.
• TenneT must activate additional power to make up for the shortage.
• Parties that can deliver at that time are rewarded for their contribution.

Trading on the imbalance market: how does it work?

Trading on the imbalance market is about responding to what the electricity grid is currently lacking or has in excess. TenneT continuously assesses the current grid balance and determines the extent of the imbalance in the system every quarter of an hour.

The imbalance price is based on the activated control energy] and the marginal bid price of the Balancing Service Providers (BSPs) used. This price can change per minute within fifteen minutes, for both purchase and input.

The greater the imbalance on the grid, the more these prices can rise or fall. In situations where both up and down regulation is necessary (control state 2), TenneT can reverse the prices for offtake and input.

TenneT's control states

To provide insight into what exactly the grid needs, TenneT uses various control states. Each control state describes the situation of the network and what action is required:

Control state 1 – electricity shortage

There is less production than consumption. TenneT must activate additional power to stabilize the grid frequency. Parties that can supply extra electricity at that time will receive compensation for this.

Control state -1 – surplus of electricity

There is more production than consumption. The grid is overloaded and TenneT has to remove power from the system. Market parties are rewarded for reducing production or absorbing additional electricity.

Control state 0 – supply and demand in balance

The system runs stable and TenneT does not have to take any corrective measures. The imbalance price generally remains limited and flexibility is hardly used.

Control state 2 – strong changes within 15 minutes

Both up and down adjustments are required within the same fifteen minutes, often due to rapidly varying solar or wind production. The market continuously responds, causing imbalance prices to move quickly.

Who can trade on the imbalance market?

Not every party is allowed to trade directly on the imbalance market. The market works through specific roles that are responsible for the balance of an entire energy portfolio.

Companies with flexible capacity, such as batteries, charging infrastructure or industrial processes, can participate, but always through a recognized market party.

BRP (Balance Responsible Party)

Responsible for keeping the total energy portfolio in balance. The BRP receives or pays the imbalance settlement and passes it on to connected customers.

BSP (Balancing Service Provider)

A party that offers flexible power to TenneT. A BSP controls assets to be adjusted up or down and receives compensation for this from the imbalance market or other balancing markets.

Energy companies and aggregators

They bundle flexible assets from customers (such as batteries or industrial customers) and act on their behalf. This makes participation possible for companies without their own BRP role.

Companies with flexible capital (indirect)

Think of battery projects, production installations, heat pumps, CHPs or charging plazas. They do not trade themselves, but are managed via a BRP or BSP and share in the proceeds or costs.

Smart battery systems expand the playing field

The imbalance market was originally designed for large market parties such as energy producers, suppliers and aggregators. Thanks to smart energy management systems, households and smaller companies can now also benefit indirectly from this market. Battery systems are playing an increasingly important role in this.

A battery system can store energy when there is a surplus and prices are low, and supply it back when the imbalance price is high. This saves energy costs and at the same time helps stabilize the electricity grid.

Imbalance market prices

The prices on the imbalance market (opens in new tab) continuously move with the current balance between supply and demand on the electricity grid. Because a large part of our generation comes from sun and wind, the weather is playing an increasingly important role.

In the event of unexpectedly low production, for example due to cloudiness or little wind, imbalance prices can quickly increase. If there is more sun or wind than expected, the price can drop to very low or even negative values ​​within minutes.

Smartbox

Achieve maximum profit on the imbalance market with Smartbox

The imbalance market requires speed, accuracy and smart power. As solar and wind cause increasing price fluctuations, flexibility is becoming more valuable than ever.

That is why we have developed the Smartbox: a powerful energy management system (EMS) that automatically controls all energy assets within a project, from solar panels and wind turbines to charging infrastructure.

In the imbalance market, it is the real-time response that makes the difference. Smartbox:

• follows real-time control signals from the aggregator and translates them into direct control of connected assets;
• ensures that batteries, charging infrastructure and other installations can respond within seconds to activations from the balancing markets;
• have batteries charged or discharged when the aggregator uses flexibility in the event of shortages or surpluses on the grid;
• smartly controls charging infrastructure so that it moves with price peaks and troughs;
• automatically adjusts sustainable generation when this is necessary from the market strategy or system balance.

As an energy company or energy installer], do you want to offer a total solution for your customers? Read more about the Smartbox or register immediately as a partner.

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