Real-time market, balancing market · Glossary

The real-time market, often also called the balancing market, refers to the market and activation mechanisms used to offset short-term deviations between electricity generation and electricity consumption during ongoing operation. Injection and withdrawal must match almost exactly at every moment, because the grid itself stores hardly any electrical energy. If this power balance is disturbed, the grid frequency changes. The balancing market is the organised interface through which transmission system operators (TSOs) activate short-term available power in order to stabilise the frequency and restore the system balance. The EU guideline on electricity balancing understands system balancing as all actions and processes by which TSOs keep the grid frequency within a defined stability range and ensure the required reserves.

Capacity and energy: two different products

The first concern is power, measured in megawatts (MW). Balancing capacity, also called reserve capacity, indicates how much positive or negative power a provider holds available for a possible activation. Positive balancing energy increases injection or reduces consumption when the system lacks power. Negative balancing energy reduces injection or increases consumption when there is too much power in the system. Only upon actual activation does an energy quantity in megawatt hours (MWh) arise, the balancing energy. A simple analogy: balancing capacity corresponds to a fire brigade that waits ready for action at the station and is paid for doing so. Balancing energy is the actual firefighting operation. In Germany, since November 2020 the two have been procured separately: balancing capacity on the balancing capacity market, balancing energy on the balancing energy market. For every awarded megawatt of balancing capacity, a balancing energy bid must also be submitted. In addition, free balancing energy bids from providers without a capacity award are possible.

Distinction from day-ahead and intraday trading

The balancing market must be distinguished from the day-ahead market and from intraday trading. On the day-ahead market, electricity quantities are traded for the following day. In intraday trading, market participants can still correct their positions at short notice, for example when forecasts change, power plants fail or load develops differently than expected. Both markets belong to the market participants' economic dispatch planning. The balancing market, by contrast, starts from operational system management. It is used not because market participants still want to trade, but because the TSO must offset a physical deviation. Intraday prices can therefore have different causes than prices for balancing energy or imbalance energy.

The term real-time market itself also needs to be put into context. In some non-European electricity markets, for example in the USA, real-time market stands for a separate, centrally operated energy market with short settlement intervals. In the EU and in Germany there is no such general real-time energy market. What is meant there are the balancing reserve markets and the settlement of balance group deviations under the guideline on electricity balancing, Regulation (EU) 2017/2195. Among other things, it governs the procurement and settlement of frequency containment reserves (FCR), frequency restoration reserves (FRR) and replacement reserves (RR).

The reserve products

In Continental Europe, the balancing market is closely tied to the products of balancing energy. They differ in activation time, control and function. The German TSOs procure all three products jointly via the regelleistung.net platform.

Frequency containment reserve (FCR, formerly primary control reserve): It responds automatically and in a decentralised manner to frequency deviations and jointly absorbs disturbances across the entire interconnected grid. Full power must be available within about 30 seconds. FCR is remunerated for capacity. There is no separate energy price.
Automatic frequency restoration reserve (aFRR, formerly secondary control reserve): The TSO activates it centrally and automatically. It replaces FCR and returns the frequency and the control area balance to the target state. The activation time is a few minutes, five minutes for the European standard product.
Manual frequency restoration reserve (mFRR, formerly minute reserve): It is called upon according to a merit order, relieves aFRR and offsets larger or longer-lasting imbalances. Its activation time is in the range of about a quarter of an hour.

These products are not arbitrary commodities. They are technically defined system services. Balancing capacity for aFRR and mFRR is tendered on the previous day: the aFRR market closes at 9:00, the mFRR market at 10:00. Since June 2022, balancing energy has been procured in quarter-hour products and remunerated under the marginal pricing method (pay as cleared). All activated bids therefore receive the price of the last bid still required. The marginal prices are determined by the European platforms: PICASSO for aFRR and MARI for mFRR.

Several levels instead of a single market

The term balancing market sounds like a single market. In fact, the balancing framework consists of several levels: prequalification of technical units, reservation of balancing capacity, activation of balancing energy, settlement of imbalance energy and responsibility of balance groups. In a prequalification, providers must demonstrate that their units deliver the required power reliably, quickly and in a controllable manner. The EU guideline requires that loads, storage and generation units within a scheduling area may be pooled for balancing reserves. In Germany, the circle of providers was extended step by step. Examples are battery storage in FCR since 2014, wind farms since 2016 and the connection of very small units below 10 kW in groups of up to 2 MW via the public internet since 2019.

Balance groups and imbalance energy

The basic institutional building block is the balance group. Suppliers, direct marketers and other market actors assign their injections and withdrawals to a balance group. The balance responsible party (BRP) is meant to ensure that forecasts and schedules match actual generation and actual consumption as closely as possible. Under the EU guideline, each BRP is to endeavour in real time to be balanced or to help balance the system. Remaining deviations are settled as imbalance energy, per imbalance settlement period, in Germany per quarter hour. This creates an economic incentive to improve forecasts and to make corrections through intraday trading rather than leaving imbalances to system operation.

In Germany, a uniform price applies per quarter hour in the four control areas of the grid control cooperation, the cross-control-area uniform imbalance settlement price (reBAP). Its basis is the costs and quantities of the balancing energy used in that quarter hour. In addition there are supplementary components, for example a link to exchange prices and a scarcity component in the case of particularly large system imbalances. The reBAP is in principle symmetric and can be positive or negative. Under-supplied and over-supplied balance groups therefore settle at the same price, only the direction of payment is reversed. A balance group that deviates against the system balance and thereby relieves it can therefore even receive a payment. If the capacity reserve is activated, the reBAP can become asymmetric in individual quarter hours.

What balancing prices say and what they do not

Prices in the balancing context serve two functions. They remunerate activated balancing energy, and they determine the costs of balance group deviations. Under the EU guideline, deviations are to be settled at a price that reflects the real-time value of energy. Nevertheless, these prices are not end-customer prices and not a simple snapshot of the value of electricity. They contain scarcity signals, activation costs, product requirements and settlement rules. Price limits also play a role: with the connection to PICASSO in June 2022, according to the German TSOs the European price cap of EUR 15,000/MWh for balancing energy was adopted. Previously, energy prices in Germany of up to EUR 77,777/MWh in October 2017 and imbalances in June 2019 had shown how closely market design, competition and incentive effects are linked. Anyone who reads balancing prices as a real-time electricity price without knowing the balancing mechanics confuses system stabilisation with the procurement market.

Distinction from redispatch

Balancing offsets the power balance of the overall system. Redispatch, by contrast, changes the operation of generation units or loads in order to resolve grid congestion. A system can be balanced and still have local congestion. Conversely, a grid without congestion can show a balance deviation that requires balancing energy. The EU guideline therefore requires that balancing energy bids activated for internal congestion management do not determine the marginal price of balancing energy.

Renewables, storage and flexible consumers

With a growing share of wind and solar power, the balancing market gains importance, because forecast errors and short-term fluctuations carry more weight. Consumption forecasts also become more demanding when heat pumps, electromobility and industrial flexibility respond to prices and control signals. It does not follow that a renewable power system would be unstable. However, short-term flexibility, good forecasts, fast data flows and clear balancing rules become more important.

Battery storage is particularly well suited because it responds very quickly and can provide both positive and negative power. Its economic role, however, depends on market rules, prequalification requirements, grid charges, activation probabilities and revenues in other markets. For energy-limited units, prequalification also takes the energy capacity into account. A storage unit that reserves balancing capacity is not simultaneously available to any arbitrary extent for arbitrage or local grid support, because all uses compete for the same capacity. Flexible consumers can also participate, such as industrial processes, electrolysers, cold stores, charging infrastructure or large heat applications. The hurdle rarely lies in technology alone. What is needed are metering, controllability, availability, aggregation, clear liability and suitable product designs.

European integration

The EU guideline provides for European platforms and standard products for the cross-border exchange of balancing energy. Germany has been connected to PICASSO for aFRR since 22 June 2022 and to MARI for mFRR since 5 October 2022. In addition there are the IGCC platform for netting opposing imbalances (imbalance netting) and joint FCR procurement in the FCR Cooperation. This can reduce costs and open up larger flexibility pools. At the same time, the requirements for harmonisation, data quality and TSO coordination increase. A cross-border activation is only possible if enough transmission capacity is available between the bidding zones and the activation elsewhere does not aggravate grid problems.

Limits of the concept

The term real-time market can give the impression that the power system is coordinated entirely in real time through prices. This is not the case. Most electricity trading is planned in advance, and power plants, storage, suppliers and consumers work with schedules. Real-time balancing is a corrective layer for deviations. It replaces neither reliable dispatch planning nor sufficient reserves or robust grid operation. Nor is it a substitute for firm capacity: balancing reserves can only be activated if suitable units are prequalified and actually available. A market mechanism cannot conjure up missing physical capabilities. It can only procure and activate existing capabilities more efficiently.

Responsibilities should also remain clearly separated. Market participants are responsible for their balance groups. TSOs are responsible for the system balance and frequency control. Regulatory authorities such as the Bundesnetzagentur set essential rules for procurement, settlement and market opening. Plant operators decide whether they offer flexibility. Anyone who uses the balancing market as a catch-all term for all short-term electricity problems blurs the differences between forecast error, grid congestion, market design, reserve need and obstacles to flexibility. Properly understood, the term describes the organised correction between planned schedules and physical reality. It links frequency control, balance group responsibility, balancing energy and short-term flexibility.

Sources

Verordnung (EU) 2017/2195 der Kommission vom 23. November 2017 zur Festlegung einer Leitlinie über den Systemausgleich im Elektrizitätsversorgungssystem — Europäische Kommission / EUR-Lex; 2017-11-23. Art. 1 (Gegenstand), Art. 2 (Begriffsbestimmungen), Art. 17 (BKV), Art. 18 (Modalitäten, Aggregation), Art. 30 (Preisbildung), Art. 44 (Abrechnungsgrundsätze)
Historie Regelreservebeschaffung — Deutsche Übertragungsnetzbetreiber (regelleistung.net); unbekannt. Tabelle zur Historie; Abschnitte Beschaffung seit November 2020, Präqualifikation, Mischpreisverfahren und Preisobergrenzen
Ausschreibungs- und Gebotsverfahren — Deutsche Übertragungsnetzbetreiber (regelleistung.net); unbekannt. Abschnitte Regelleistung (aFRR und mFRR) und Regelarbeit
Ausgleichsenergieabrechnung gegenüber Bilanzkreisverantwortlichen — Amprion GmbH; unbekannt. Abschnitt Ausgleichsenergiepreis / reBAP
Erläuterungen zu Daten Regelenergie — Deutsche Übertragungsnetzbetreiber (netztransparenz.de); 2023-07-10 (laut Dateiname). Abschnitt 2.1 reBAP

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Edited by eCMS on 11.11.2026 19:42