What is balancing energy?
Terms briefly explained
Control energy is also referred to as control power or reserve power. To ensure that the electricity grid functions properly and is not overloaded or underloaded, every power plant operator must calculate and register the amount of electricity that they will feed into the grid on the following day. In the same way, energy suppliers or industrial companies must report how much electricity they will take from the grid. These data are called schedules. They must be submitted to the transmission system operators on a quarter-hourly basis. The entire process is known as schedule management.
The transmission system operators ensure that the frequency in the electricity grid in their control area is always 50 Hertz. This ensures stability and security. There is no regulation within a range between 49.99 and 50.01 Hertz. However, if these values are exceeded or undercut, the TSO must intervene and utilise reserve power or control energy. Control energy is used in a control band of 49.8 to 50.2 Hertz.
Control energy can be positive or negative control energy: Positive control energy is required when demand exceeds supply. In this case, additional energy is fed into the grid. Negative balancing energy is required when supply exceeds demand. In this case, energy is taken from the grid or the feed-in is reduced.
How does the balancing energy market work?
The balancing energy market - or balancing power market - is about power plant operators holding power in reserve. This is required if the grid frequency falls too sharply - for example, if more electricity is drawn from the grid than was previously forecast. Similarly, the grid operators need reserve power if the frequency rises too sharply - then power plant operators have to reduce their production or consumers have to increase their demand. There are three types of balancing energy, which differ according to their duration: Primary reserve, secondary reserve and minute reserve.
Primary control power or primary reserve
In order to maintain the normal frequency of 50 Hertz in the electricity grid, the primary control power (or primary reserve) compensates for unforeseen fluctuations in a matter of seconds. It must be available within 30 seconds to prevent a power outage. The primary control reserve is provided by the central European transmission system operators ENTSO-E (European Network of Transmission System Operators for Electricity).
The primary reserve is activated automatically: Providers of primary reserve measure the grid frequency at the point of generation or consumption so that they can react quickly to changes. This eliminates time losses, for example for communication channels during control by a TSO.
Secondary control power or secondary reserve
The secondary reserve steps in after the primary reserve and must be available within five minutes. In contrast to the primary reserve, it is regulated and provided by the four German transmission system operators. They exchange information about their electricity grids and can therefore also balance out grid fluctuations across the borders of their control areas.
In the past, secondary reserve was provided by power plants such as pumped storage plants or gas turbines that could be easily controlled and switched fully automatically. Today, virtual power plants are also increasingly contributing to grid stability. These are combinations of renewable energy power plants, biogas plants, battery storage systems, CHP plants or flexible electricity consumers. Together, they can be controlled in a similar way to large power plants. The secondary reserve providers are connected to the control centre of their transmission system operator and exchange data in real time. The power frequency controller of a TSO distributes the secondary reserve to the providers. This is fully automated, depending on the power and labour price offered.
In the event of grid fluctuations lasting longer than 15 minutes, the secondary reserve is replaced by the minute reserve.
Tertiary control power, minute control power or minute reserve
The terms tertiary control power, minute control power and minute reserve are used synonymously. They stand for the reserve capacity that must be available within 15 minutes.
Positive minute reserve is required when there is too little electricity in the grid. Providers of positive minute reserve are electricity producers who feed in additional electricity to compensate for underproduction. These are also flexible industrial companies that reduce their electricity consumption in order to keep the frequency in the electricity grid stable.
Negative minute reserve is required when there is too much electricity in the grid. Providers of negative reserve capacity are power plants that can reduce their production. They are also flexible industrial companies that can increase their electricity consumption.
As with the secondary reserve, flexible gas-fired power plants or pumped storage power plants have primarily offered reserve capacity for electricity in the past. They can ramp up, ramp down or stop their production within 15 minutes. Increasingly, renewable energies in virtual power plants are also taking on this task.
What is balancing energy?
While the term balancing energy refers to the power and the actual flow of electricity, the term balancing energy refers to the cash flow behind it. In the case of balancing energy, the costs incurred are allocated. Those responsible for the imbalance pay - the providers of reserve power receive remuneration.
If balancing energy has flowed, the excess grid operator issues an invoice to the power plant that has not achieved its announced feed-in. Payment is due for both underproduction and overproduction. Electricity quantities that are fed in too little or too much are called shortfalls and surpluses. Even if an electricity consumer - i.e. an energy supplier or industrial company - does not purchase the announced quantity, it must pay balancing energy.
The standardised balancing energy price (reBAP) applies across all control areas. The transmission system operators calculate it on the basis of exchange prices.
Market participants and their role in the provision of control and balancing energy
Auctions for the minute reserve have been taking place since 1 December 2006. Since 1 December 2007, auctions have also been held for primary and secondary capacity. The auction for the secondary reserve takes place daily until 9 a.m. for the following day on an online platform of the transmission system operators. The auction participants must state the amount of the bid and define whether it is negative or positive balancing energy. The following players offer balancing reserve:
- Operators of large, flexibly deployable power plants, e.g. gas-fired power plants
- Operators of renewable energy plants such as wind farms or photovoltaic parks - usually combined in virtual power plants
- Operators of combined heat and power plants
- Operators of large battery storage systems
- Industrial companies with flexible consumption
Control energy (ancillary services) from wind farms
Wind turbines are playing an increasingly important role in the provision of balancing energy. Operators of wind farms must first take part in a prequalification process. In this, they must ensure that the turbines fulfil the technical and operational requirements. These are the main steps and requirements:
- Technical requirements: Wind farms must prove that they are able to provide the required balancing energy reliably and quickly. This includes the ability to quickly adjust their output and keep generation stable.
- Performance: Operators must submit detailed technical documentation and evidence to prove that the wind farm is efficient and reliable. This includes load profiles, technical specifications and simulations.
- Test runs and certification: Before final approval, wind farms must undergo test runs to prove operationally that they can provide balancing energy. The transmission system operators monitor and evaluate the tests.
- Regular inspection: Even after prequalification, wind farms must be inspected regularly to ensure that they continue to fulfil the requirements and can reliably provide balancing energy.
Especially in the international context of offshore wind farms, balancing energy services are often referred to as ancillary services.
Billing of control and balancing energy
Operators of flexible generation plants offer their services for the secondary reserve and the minute reserve in an auction process. Balancing energy prices are made up of a capacity price and a labour price: The capacity price is a fixed price for the provision of balancing power. The labour price is the remuneration for the work actually performed.
Balancing energy has been traded on the balancing energy market since November 2020. Primary power, secondary power and minute reserve are traded in 4-hour blocks. Companies with flexible systems can therefore generate additional revenue on the balancing energy market.
Capacity price
Operators of flexible systems for generating or storing electricity and companies with flexible electricity consumption receive the capacity price for making their systems available for the reserve. Each provider can determine the amount of its capacity price itself according to its provision costs. The providers take part in an auction for the following day. The transmission system operators then sort all the awarded plants from the lowest to the highest price in a merit order list (MOL) based on their capacity prices. Balancing power providers that have been awarded a contract on the balancing power market must also provide the quantity.
Labour price
The transmission system operators use the forward auction to ensure that sufficient capacity is available. Which systems they actually call up depends on the current labour prices of the systems. The suppliers determine these labour prices independently for each plant and trade them in an auction very shortly before delivery. If a transmission system operator requires reserve capacity, it first calls up the systems that have specified the lowest energy price. It then adds further, more expensive plants until the demand is covered. This procedure ensures that the reserve capacity remains as favourable as possible for the transmission system operators - and therefore also for the economy.
Balancing energy costs
Balancing energy costs fluctuate depending on developments on the electricity market. When the minimum capacity for installations on the balancing energy market was lowered from 5 MW to 1 MW, the number of participants increased and capacity prices initially fell. However, they have been rising since 2021. The main reasons for this are the increased CO2 and gas prices.
Importance and future of balancing energy in the energy market
As part of the energy transition, there are fewer and fewer large power plants in Germany that produce electricity on a consistent basis. Instead, the proportion of renewable energy from wind and solar power is increasing. As these fluctuate and cannot be predicted 100 per cent, the need for flexible solutions is growing. Control energy balances out short-term fluctuations in the electricity grid.
Not many renewable energy plants are currently participating in the balancing energy market, as the prequalification process is complex. Also because direct marketing contracts for renewables are often only concluded for one or two years, it is often not worth the effort to use the plants for reserve capacity. Technologies such as battery storage, virtual power plants and smart grids will therefore play a key role in the future.
Overall, the future prospects for balancing energy are positive, as it is crucial for a sustainable and stable energy supply.
