In power systems based on alternating current, the demand-supply balance has to hold at every instant of time to ensure frequency stability at, usually, 50 Hz or 60 Hz. European power markets work in time scales of 15 minutes and longer. For shorter time horizons, another mechanism is needed: balancing power. The system operators buy balancing reserves from power plants and consumers, and activate them when needed. Costs are recovered through grid fees and the imbalance price.
Neon is an expert in balancing markets. We have published an assessment of the impact of wind and solar power on balancing markets as well as an up-to-date market overview. Theoretically, the need for balancing power tends to be increased by the use of wind and solar power. Empirical evidence, however, tells another story: while German wind and solar capacity has tripled since 2008, balancing reserves have been reduced by 15% – and costs by 50%! This is the “German Balancing Paradox”.