Second stage of the Balancing Market reform went live as of June 14
The main goal behind the changes introduced is to improve the efficiency of electricity pricing on the Balancing Market (BM), which is expected to encourage its participants to be more flexible and match their consumption or production to the current needs of the electricity system.
The Balancing Market is a technical market operated by the transmission system operator, PSE, where electricity produced or consumed that has not been previously sold or purchased on the wholesale market or otherwise contracted is accounted for. The main task of the Balancing Market is to balance electricity supply and demand while ensuring security of supply.
The changes which came into force on 14 June result from the requirements set forth in the EU Electricity Internal Market Regulation[1] and Regulation establishing guidelines for balancing[2]as well as from the Implementation Plan for Electricity Market Reforms developed on the basis of the aforementioned legislation. Poland was required to prepare the Plan and submit it to the European Commission in connection with the operation of the power market in our country.
The process of reforming the Balancing Market has been five years in the making, with the first stage having been implemented on 1 January 2021. The changes introduced at that time included broadening the list of entities that can participate in the balancing market to include RES generators, consumers and electricity storage facilities.
Second stage of the Balancing Market reform—the role of URE
From the Regulator’s perspective, the most important decision related to the second stage of changes on the Balancing Market was the approval by the President of URE of new Balancing Terms (WDB), which regulate the operation of the BM. The Balancing Terms were approved by decisions of the President of URE dated 27 September 2023. and 26 January 2024, and come into effect on 14 June 2024, together with the market reform.
Simultaneously, amendments to the PSE’s Transmission Grid Code and the Grid Codes of five largest DSOs, approved by the President of URE in order to, among other things, align both codes to with the amended Balancing Terms also came into force on 14 June.
What will change from 14 June?
The overarching objective of the second stage of the Balancing Market reform is to strengthen the market mechanisms in such a way that its participants are induced, through appropriate price signals, to increase their flexibility and match their production or off-take with the current needs of the electricity system. Among other things, these changes will contribute to better integration of renewables in the system and reduce the number of non-market-driven reductions in RES generation.
The improved real-time energy pricing mechanism has been achieved mainly through the reduction of the settlements for balancing energy and imbalance to 15 minutes (from one hour). The electricity price will also take into account the valuation of the operating reserve and the costs associated with maintaining the sources that stabilise the system.
The reform does also change the structure of entities operating on the Balancing Market, as its participants will now be designated as Balancing Service Providers and Balancing Responsible Entities. In addition, the participation in the BM will be open to entities with a minimum generating capacity of 0.2, whereas until now participants had to have at least 1 MW of capacity. The possibility has also been introduced for smaller market participants to merge into larger groups, participating in the market together. This will increase competition on the BM.
The changes also concern the structure of BM facilities and the range of balancing services. There will be new categories of facilities, Balancing Units and Scheduling Units, as well as new balancing services enabling not only the procurement of electricity but also balancing capacity (Frequency Maintenance Reserve, Frequency Restoration Reserve and Replacement Reserve).
The reform also covers the planning process for the operation of the national electricity system and the rules for the notification of commercial and technical data by market participants to the transmission network operator.
The reform has also introduced rules for the participation of Polish generators in the European platform for the exchange of balancing energy from replacement reserves and the European platform for imbalance netting process to the Balancing Terms, which will enable Poland’s participation in these balancing instruments of the EU energy market.
Detailed information on the second stage of the Balancing Market reform is available on the PSE website.
[1] Regulation (EU) No 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity.
[2] Commission Regulation No 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing.