Information on the balancing energy price

German Imbalance Settlement Price (reBAP)

Since December 2022, the following model description has been used to determine the reBAP in accordance with stipulation BK6-21-192 of the Bundesnetzagentur (German Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway):

Model description of the reBAP calculation since 08.12.2022

Within the framework of the further development of the imbalance price system, the above-mentioned model will be used to implement Bundesnetzagentur’s stipulations BK6-12-024 of October 25th, 2012, BK6-19-217 of December 11th, 2019, BK6-19-552 of May 11th, 2020, BK6-20-345 of May 11th, 2021 and BK6-21-192 of April 28th, 2022 in terms of billing and in order to improve balancing group management.

General information on the imbalance price

In order to guarantee the secure operation of the grid at any time, each (commercial) electricity producer & consumer must provide a quarter-hourly forecast of the electrical energy to be injected or withdrawn from the grid on the following day. Unforeseen deviations in the forecast or power plant outages lead to a deviation, which also leads to a deviation in the respective balancing group (BG). To compensate this and to ensure that the electricity demand is equal to ('in balance with') total electricity supply, the transmission system operators (TSOs) must use balancing energy.

The imbalance price, also known as reBAP (uniform imbalance price across control areas in Germany), determines on the balancing group side the price of the energy used to balance the system. In a perfectly balanced system without any forecast deviations within the individual balancing groups and thus without the use of balancing, this value would therefore amount to 0 €/MWh. Therefore, the reBAP is not understood as a penalty for forecast deviations of the balancing groups, but rather represents the price of the activated reserves to balance the system. This can lead not only to costs, but also to revenues, if the prices for activating these reserves are negative or a balancing group has deviated from its forecast in a system-supporting manner.

Historic development

Until May 2009, there was an individual imbalance price per load frequency control area in Germany.

In June 2010, a uniform nation-wide compensation energy price was introduced.

With the full cooperation of the German TSOs in the national Grid Control Cooperation (GCC), the determination of the imbalance price was also standardized throughout Germany (BK6-08-111). This represents an average volume-weighted energy price, which is calculated for every quarter hour based on the costs and revenues of the activated balancing energy and the system imbalance. Due to the symmetrical pricing system and the netting of positive and negative volumes and costs, small GCC imbalances in the denominator can lead to high prices. In order to avoid high prices in case of small imbalances, the imbalance price is capped at the highest settled balancing energy price for aFRR and mFRR. These cost cannot be charged to the balance responsible parties directly and are therefore turned over as an additional price component. Depending on the sign of the GCC imbalance, this is a price premium or discount that remains constant over the month.

Over the years, the following noteworthy adjustments and improvements have also been made to the imbalance price system:

As of December 2012, the reBAP was further developed in accordance with stipulation BK6-12-024, the main changes being the coupling of the reBAP to the hourly intraday exchange price index ("incentivizing component"). In order to incentives balance responsible parties more to be balanced or to support the system, a surcharge or discount on the reBAP was introduced if 80 % of the positive or negative balancing capacity contracted in Germany has been activated ("scarcity component"). In addition, the above-mentioned stipulation made it possible to include the costs from price capping, which could not be passed on until then, together with the additional revenues in the grid fees.

A turnover mechanism was integrated as of October 2013, which regulates the handling of price corrections following the publication of the reBAP. Due to the complexity of determining the individual input variables of the reBAP, errors can occur in the reBAP calculation. Therefore, the correction mechanism has been developed. This mechanism provides for the additional or reduced revenues resulting from error corrections to be offset in the reBAP of the following month(s). An additional component is used for offsetting, which represents a price increase or decrease that remains the same over the month in terms of amount every quarter of an hour. In order to prevent miscalculations from having a significant impact on the reBAP, the corresponding limit for the correction within a month was set at a maximum of +/- 3% of the regular costs for balancing energy of the respective month. Moreover, this value may not exceed +/- 3 €/MWh.

The industry compromise has been implemented on 01.05.2016.

It provides an additional limitation of imbalance prices to avoid price peaks in the case of low GCC imbalances. Within the scope of the coordination of an industry compromise between the balance responsible parties and the TSOs, an additional capping step (AEP20) has been developed and approved by the Bundesnetzagentur. The aim has been to introduce a further cap to avoid high balancing energy prices for GCC imbalances between -125 MWh and +125 MWh or -500 MW and +500 MW remaining after the AEP2 calculation step. The limitation is implemented as a linear increasing or decreasing function depending on the NRV balance. To determine the limiting function, the volume-weighted average price of the hourly product of the respective hour from continuous intraday trading on EPEX Spot is provided with a premium or discount between 100 and 250 €/MWh.

In February 2020 the scarcity component has been adjusted.

This stipulates that the contracted FRR is no longer compared with the balance of the control reserve used, but that the contracted FRR is compared with the balance of the GCC (Balance_GCC).

In July 2020, the incentivizing component was fundamentally redesigned.

The revised incentivizing component fulfils, in particular, recital 17 of the guideline on electricity balancing, working efficiently towards a balanced system, creating incentives for market participants to maintain the system balance and reflecting the real-time value of the energy in the imbalance settlement price. This now provides that, in order to form the IP_3, a comparison is made with the imbalance settlement price index (ID AEP) introduced specifically for this purpose. In addition, a minimum gap of 25%, but at least €10/MWh, between ID AEP and the balancing energy price is provided for if the absolute value of the GCC balance is greater than or equal to 500 MW. In the range between 0 and 500 MW, it increases linearly with the level of the GCC balance.

Model description of the reBAP calculation from 01.07.2020 to 31.07.2021

In August 2021, the scarcity component was fundamentally revised.

This is intended to ensure incentives for market participants to balance their balancing groups, especially at times of strong system imbalances. The proportionality of the influence of the scarcity component on the level of the reBAP is achieved by limiting the effectiveness of the price component to times of strong system imbalances and by the nonlinear increase of the price component depending on the GCC balance. The now newly defined component is a second-order function (parabolic curve) depending on the GCC balance and takes effect when the latter has a value of at least 80% of the dimensioned FRR for the GCC.

Model description of the reBAP calculation from 01.08.2021 to 21.06.2022

In June 2022, the imbalance settlement price was fundamentally revised.

The previous components IP3 ("incentivizing component") and IP4 ("scarcity component") will henceforth be managed as AEP module 2 and AEP module 3 respectively following the European harmonization carried out within the framework of the introduction of the Imbalance Settlement Harmonization Methodology "ISHM" and will be transferred to the new methodology in the previously known manner. The remaining (capping) components, such as those of the former IP1, IP2 and IP20, will be dropped. There will also be a change in the way deficits and surpluses are accounted for. The handling of price corrections after publication of the reBAP, previously carried out as a 3% or 3 €/MWh surcharge or discount, is also eliminated by the requirements of the ISHM. As a further innovation, within the scope of the newly introduced AEP module 1, a conversion of the previously cost-based AEP determination (previously in IP1) to a price-based determination based on the prices of the aFRR and mFRR platforms PICASSO and MARI will be carried out. The switch to an ISHM-compliant calculation represents the biggest innovation of the last decade in the field of balancing energy price determination. Besides the harmonization aspect in ISHM, the reduction of complexity and error-proneness in the calculation paired with a faster calculation and publication of the data represent one of the main goals.

In December 2022, additional quantities were considered in the AEP module 3 (scarcity component).

In December 2022, the repeal of the release of regular work bids was taken into account in the AEP. BNetzA has decided the cancellation of the release on the regular work market (RAM) on 31.10.2022 with decision BK6-22-162 . The TSOs have implemented this as of delivery day 08.12.2022. At the same time, the TSOs take into account the power exceeding the dimensioned demand for the two bases in AEP module 3.