How does the balancing market work?

How does the balancing market work?

The TSOs procure balancing services (balancing capacity and balancing energy) across grid areas and partially in cooperation with neighboring countries. The tenders take place in open, transparent, and non-discriminatory process, according to the guidelines of the Federal Cartel Office, in line with the regulations of the Federal Network Agency, and European regulations and methods. 

The basic procurement process for balancing services occurs in four steps: from the prequalification of providers (1), i.e., fulfilling all requirements, through tendering (2) and awarding the required quantities by the TSOs and activating the reserves (3) to the settlement (4). 

Step 1: Prequalification 

Before a provider can participate in the balancing market, they must meet the organizational and technical requirements within the prequalification process. The aim of prequalification is to determine the suitability of a potential provider for the provision of balancing services. The requirements vary depending on the type of balancing services. More information on prequalification can be found under Become a Provider and you can download the list of all providers on the right.

Step 2: Tenders

Afterward, prequalified providers can participate in the tenders for balancing services. The tenders are carried out by the TSOs after determining the needs. The demand for balancing services fluctuates according to dimensioning. Data on historical tender quantities and bid prices can be found in the data center. 

Balancing capacity market 

The tenders for balancing capacity are conducted daily for the following day in the balancing capacity market (BCM). The product length for all balancing capacity products (FCR, aFRR, and mFRR) is four hours, starting with the time slice from 0 to 4 o’clock and ending with the time slice from 20 to 24 o’clock. While the procurement of FCR is thus completed, and each offer awarded in the BCM is remunerated at the offered balancing capacity price, only the foundation for full procurement in the balancing energy market is laid for aFRR and mFRR. 

Balancing energy market 

Once the auction for balancing capacity is completed, the balancing energy market (BEM) opens. In the balancing energy market, the actually activatable balancing energy of aFRR and mFRR that is actually available in that moment is procured. Balancing service providers with awards in the BCM must offer the awarded quantity in the balancing energy market. All providers can also submit balancing energy bids. All balancing energy bids are awarded. 

The products in the balancing energy market have a duration of 15 minutes. The market for each quarter-hour product closes 25 minutes before the product start. All bids are sorted ascendingly by energy price and forwarded as a merit-order list to the TSOs' call-off systems and the activation platforms MARI (for mFRR) and PICASSO (for aFRR). 

Step 3: Activation of balancing capacity and balancing energy

If a provider has received an award for a product, they must maintain balancing capacity or deliver balancing energy during operation. The reserves are activated as needed. The need for FCR arises from frequency deviations from the normal frequency of 50.0 Hertz. In comparison, the need for balancing energy arises at any time due to deviations of balancing group positions from their planned positions (schedules). 

While FCR is activated automatically by providers, each TSO sends its need for balancing energy (aFRR and mFRR) in real-time to the call-off platforms, as well as available cross-border transmission capacities. The platforms determine the most cost-effective coverage of needs. More about the call-off platforms MARI and PICASSO can be found under European Cooperations. 

Since there are other interested countries for a joint procurement of aFRR, the ALPACA Project was founded. What ALPACA means and further details about the cooperation can be found under European Cooperations. 

Step 4: Settlement of balancing capacity and balancing energy

The final step is the settlement. While the costs for maintaining balancing capacity are financed through the TSOs' network usage fees, the balancing group managers bear the costs for the activation of balancing energy. For this purpose, the TSOs determine an imbalance price every quarter of an hour and pay the balancing group managers monthly as part of the balancing group settlement. Everything about imbalance, balancing groups, and the cross-control area unified imbalance price can be read on the website netztransparenz.de. 

More information on the remuneration of the various types of balancing services is available to providers under Settlement. Additionally, you can find data on historical award prices in the data center. 

Information on how to become a balancing service provider can be found in the section Become a Provider.