Balancing the Unbalanced Supply of Generation Sources – Additional Costs in a Competitive Energy Market

Abstract

Trade balancing of balancing mechanism units entails additional costs of electricity purchases for consumers’ own needs. Trading companies constantly look for effective tools to reduce the costs of their operations in the electricity market through supply or demand management. Balancing the unbalanced supply of generation sources refers not only to the area of balancing market settlements, but also to changes in the demand for electricity from the wholesale market in a longer time horizon. The imbalance of supply or demand is defined as a deviation resulting from a change in the power output of various generation sources in the local market, and a change in power consumption by customers compared to its earlier forecast. Two areas (periods) must be distinguished as parts of a balancing mechanism unit’s balancing, i.e. balancing of changing long-term prediction of demand for electricity with generation sources output, and balancing of short-term (daily) prediction and the actual output of generation sources. In the balancing process a variety of generation and load units available on the local market is utilised. The paper discusses the costs of balancing arising for trading companies, and presents a conceptual possibility of a balancing mechanism unit’s balancing taking into account renewable energy sources selected from the local market.