The role of the BRP
The responsibility for maintaining the instantaneous balance between generation and consumption lies with the transmission system operator. It has to assure that the control area they are responsible for is in balance. In Belgium there is only one control zone that is covering the whole country and is overlooked by Elia. The control area does not necessarily have to cover a whole country. For example, in Germany there are four zones.
To assure the balance in the control area is maintained, Elia outsources this responsibility to the so-called Balance Responsible Parties (BRPs, in Belgium also called ARPs for Access Responsible Party). A BRP is a private legal entity that overlooks the balance of one or multiple access points to the transmission grid. The BRPs portfolio is also called the balancing group. The BRP composes a balanced portfolio by combining injection, off-take, exchange with other BRPs and possibly in- or export to another control area. Each generator and off-taker in the grid is obliged to have a contract with a BRP. Alternatively, they can be their own balancing responsible party.
To illustrate the role of a BRP, consider the following example. An electricity supplier buys his electricity from a wind farm in an over the counter contract. The day itself, say a windy Friday, there is low household demand and high wind production. Assuming the supplier is also its own BRP, his balancing group is composed of the injection by the PV plant, the offtake from the connected households and the trades with other BRPs via the power market. At all times he is responsible for the balance of this balancing group.
As for BRP A in the graph below, the high wind farm production and low energy consumption might create an excess imbalance. At the same time, there might be another BRP B which has a shortage with respect to its original nomination. This might be caused by an outage in the production plant of their balancing group and a higher consumption by a factory in the balancing group. In the power exchange, both BRPs can trade to compensate their imbalance as good as possible. It might indeed be more cost effective to solve the imbalance by trading an excess or shortage of energy rather than taking measure within the own balancing group.
The total imbalance that is not settled is resolved by Elia via its contracted reserve power providers. The reserve markets are discussed in more detail here.
To incentivize the BRPs to do their homework well and nominate balanced portfolios, Elia will impose a tariff to BRPs who are in imbalance. In the end, they endanger the generation-consumption balance in the grid. On the other hand, BRPs that deviate from their nomination in a way that helps countering the imbalance are being rewarded. Therefore, Elia publishes imbalance data on their website in nearly real time. Intraday imbalances are thus allowed in Belgium, either punished or rewarded financially, but it is not always the case in other European countries. For example, in Germany a system like it exists in Belgium is not in place.
The financial settlement happens after the actual delivery of electricity. Both for downward and upward imbalance tariffs are imposed. Until 2012, those prices were based on average day-ahead market prices. Since then, a new pricing system is in place which reflects the costs for Elia to actually compensate the imbalance. The tariffs are based on two prices:
- The marginal incremental price (MIP): the price of the last activated upward regulation reserve bid in the merit order curve (learn more about the merit order curve here)
- The Marginal Decremental Price (MDP): the price of the last activated downward regulation reserve bid in the merit order curve
The formulas for the calculation of a quarter-hourly imbalance tariffs are given in the table below and taken from the Elia website. Prices for positive imbalance can either be positive or negative. A positive price for positive imbalance (injection exceeds offtake) means a payment from Elia to the access responsible party and a negative price for positive imbalance means a payment from the access responsible party to Elia.
Prices for negative imbalance (offtake exceeds injection) can either be positive or negative. A positive price for negative imbalance means a payment from access responsible party to Elia and a negative price for negative imbalance means a payment from Elia to the access responsible party.
Alpha is a correction factor that is applied to the imbalance price relevant for those BRPs supporting the system. These are the BRPs that have a postive imbalance when the overall system imbalance is negative and vice versa. Alpha is zero when the system imbalance is small. This threshhold is currently set at 140 MW. If the system imbalance exceeds the threshhold alpha is calculated based on the imbalance during the current and the past 7 quarters. The higher the current system imbalance is and the historical system imbalance was, the higher is the factor alpha. The reasoning for the application of this factor alpha is to avoid that the BRP witholds available balancing power even though system imbalances are high as he speculates for even higher imbalance prices in the future. The exact calculation rules for alpha can be found on the Elia website.