In a decentralized market, the imbalance settlement price is an important price signal aimed at incentivising balance responsible parties and/or balancing the system.
Balance responsible parties are financially responsible for their imbalances. Balance perimeter imbalances give rise to financial compensation between RTE and balance responsible parties. The "energy" component of the balancing-imbalances account (BIA) groups these financial flows. It is intended to be balanced by applying a factor “k”.
Imbalance Settlement Price Calculation
The principles for calculating the imbalance settlement price (ISP) provide a financial incentive to correct imbalances. They reflect the cost of balancing operations by RTE to balance the French power system.
For each half-hourly interval, the ISP is calculated as a function of the balancing trend, the volume weighted average price (VWAP) and the sign of the balance responsibility party’s imbalance (plus or minus).
The imbalance is said to be positive (respectively negative) if the remaining balance [generation - consumption] of the balance responsible party’s perimeter is positive (respectively negative). In the event of a positive imbalance (respectively negative), the balance responsible party is paid (respectively charged) by RTE.
If the volume weighted average price (VWAP) is positive or zero
VWAPU/D: volume weighted average price of balancing energies activated upward/downward, of imbalance at borders and imbalance netting (see Volume Weighted Average Price paragraph of the MA-RE Terms and Conditions Section 1).
The trend is said to be upward if the overall imbalance of the power system is negative or zero (i.e. when the overall balance for France [generation- consumption] of the system is negative), and downward in the opposite case. More details for the calculation of the trend are in the Trend of the French electricity system paragraph of the MA-RE Terms and Conditions Section 1.
Note 1: The Positive Imbalance Settlement Price cannot be greater than the Negative Imbalance Settlement Price.
Note 2: The Negative Imbalance Settlement Price cannot be less than the Positive Imbalance Settlement Price.
Invoicing Balance Responsible Party Imbalances
Every month and for each imbalance settlement interval (today half-hourly intervals), RTE calculates the balance responsible parties’ imbalances and invoices them at the imbalance settlement price. The sum of the remuneration of each imbalance settlement interval results in a monthly imbalance invoice.
Prior to the index meter reading of consumers, balance responsible parties are in the “imbalance” process, during which M+1 to M+12 are invoiced. Each invoice date M+X takes into account any update of the ISP resulting from fine-tuning of the balancing volumes and their prices.
Following the index meter reading of consumers, is the "temporal reconciliation" process, which can be used to recalculate balance responsible party imbalances based on metered data. It allows the invoicing of balance responsible parties in October Y+2 for the period from July Y to June Y+1.
Revision of the factor "k" and calculation of "k’"
Factor "k" is a parameter of the imbalance settlement price. It is defined ex ante with the aim of balancing income and expenditure of the energy component of the balancing-imbalances account based on historical data. Since 1 January 2019, "k" is fixed at 0.05. It may be revised up to 2 times per calendar year. Any revision is submitted by RTE to the CRE for approval.
For a given calendar year Y, "k" is then reevaluated in Y+2, to obtain a "k'” value ex post which ensures the balancing-imbalances account reaches the final balance set by the CRE (in practice the target balance is 0). The imbalance invoices of balance responsible parties are recalculated retroactively with the "k’”. This operation gives rise to the payment to balance responsible parties of the difference between the final imbalance invoices and the recalculated imbalance invoices.
RTE sends balance responsible parties a forecast of the repayment for the year Y (estimate of "k"') before the end of the month of March Y+1.
History of the k and k’ factors and associated imbalance settlement prices
The "energy" component of the balancing-imbalances account (BIA)
The BIA’s “energy” component records the income and expenditure from the BRP system and the balancing mechanism. It thus enables subsequent (1) repayment to BRPs of overpayments or (2) invoicing of BRPs for negative balances after the last recalculation of imbalances.
The successive monthly balances of the “energy” component of the BIA set aside are also remunerated before payment of the annual balance.
The “energy” component of the BIA includes financial transactions relating to:
- Imbalance settlement of balance responsible parties.
- Balancing and counter-balancing after deduction (or addition) of additional costs from upward (or downward) balancing activated to handle congestion or reconstitution of frequency ancillary services or reserve margins.
- Penalties for failure and compensation for non-compliance with the conditions of use of balancing mechanism bids.
- FCR and aFRR energy (frequency containment reserves and automatic frequency restoration reserves).
- Imbalance netting.
- Imbalances at borders and physical compensation of the Continental Europe Synchronous Area.