What is a balancing price? For Balancing Responsible Parties (BRPs) the term is well known. For those not directly involved in these markets, understanding what they are and their impacts can be important.
Balancing prices are the cost of keeping energy transmission systems in balance - something which is required to ensure security of supply. The Transmission System Operator (RTE in France) is responsible for balancing energy consumption and production.
Where production is not equal to consumption, BRPs buy and sell the volumes required by the TSO at the balancing price.
Who does the balancing price impact?
Everyone in the power production value chain is affected as exposure to the imbalance market arises due to imbalances in physical portfolios. Once the system's balancing cost for the delivery period is calculated, any volume deviations are then resolved at that cost.
The parties directly affected by balancing prices include renewable power producers, energy utilities and speculative traders.
Because weather conditions dictate their output, renewable energy sources are unable to consistently match forecasted levels - unless they are co-located with battery storage or are able to take advantage of turn down schemes.
Power producers able to manage their output, such as nuclear or gas, are less exposed to imbalance prices. They can tailor their generation levels to reduce their exposure to these costs.
Balancing prices also directly affect speculative traders. This is because they arbitrate intraday markets against the balancing price. They can make money by selling power when there is a shortage, having previously purchased it at a lower price.
Balancing prices also indirectly affect asset owners who subcontract their asset management and are liable for imbalance fees.