A comparison of imbalance settlement designs and results of Germany and the Netherlands

Abstract

Imbalance settlement is a vital part of the balancing market, i.e. the institutional arrangement that establishes market-based balance management in liberalized electricity markets. We investigate the impact of the imbalance settlement design on the behaviour of Balance Responsible Parties and thereby on balancing market performance by means of a comparison of the German and Dutch imbalance settlement designs and balancing market results for the period May-December 2009. It is found that Germany has much higher activated balancing energy volumes, imbalance prices and actual BRP cost levels than the Netherlands, but these differences are perhaps rather caused by balancing energy market design differences and differences in intermittent generation shares than by imbalance settlement design differences. The real-time publication of balance regulation in the Netherlands enables internal balancing by BRPs, which may reduce the size of system imbalances. Generally, BRPs will over-contract a little, because of the lower risk of having a negative individual imbalance and because of the evening out of imbalance costs over a longer time period.