There are two dimensions to electricity balancing: balancing energy and balancing reserves.

Balancing energy is provided close to real time by balancing services providers (BSPs), normally by bidding in a balancing market. Almost any party can be a BSP – with small-scale generation, demand side response, renewable resources and intermittent resources all capable of providing balancing services.

However, due to the risk that BSPs may not be able to provide sufficient balancing energy in real time, transmission system operators (TSOs) can ensure resources are available by securing “balancing reserves”.  Balancing reserves are secured, normally via contracts, ahead of real time and can be activated either automatically or manually to balance the system in real time.

The Network Code on Electricity Balancing (NC EB) deals with both of these dimensions.

Balancing, at is simplest, is ensuring that the amount of energy produced (generated) is equal to the amount used (consumed) at each point in time. This is done by monitoring the frequency of the transmission grid (which is covered in the NC LFCR) and taking actions to alter the generation or demand on the system (for example increasing/decreasing the amount generated or decreasing/increasing the amount consumed). This is electricity balancing.

The development and integration of the European electricity market follows clear target models in all areas except balancing. For this reason, the NC EB sets out a clear series of steps, which over the course of six years will see balancing markets grow from their current relatively underdeveloped state to first a set of regional markets and later a pan-European market.

This pragmatic, incremental approach will allow all involved to gain and share experience and to take steps forward at the right time, based on a consideration of what is best for the market and for system security. This will make for more robust and effective long-term solutions, more competition and lower overall costs of balancing the European electricity transmission system.

There are several examples of cross-border balancing markets in Europe today, although those examples are very different and tend not to cover multiple countries.  Therefore, European balancing markets are at a very early stage of development in most places. The exception is the Nordic region where the four countries share balancing resources in a single market.

Some balancing schemes have been developed in recent years, including the Grid Control Cooperation initiative, which operates in Germany and several neighbouring countries;  and the BALIT initiative, which involves Great Britain and France. Other mechanisms are under development in other parts of Europe.  These schemes will act as pilot projects, allowing experience to be gained and best practice to be shared.

European Member States do need to ensure that their electricity systems are secure.  However, if they choose to achieve this objective using only national resources, the costs are likely to be greater and the risks may be higher than if the combined European resources are used.  Each country has a specific set of characteristics, based on history or geography, and there are significant opportunities for mutually beneficial outcomes from pooling these resources.

For example, one of the reasons that Denmark can integrate so much wind energy securely is its access to balancing power from the hydro resources in Norway. Therefore, common European balancing markets can put downward pressure on costs and enhance security of supply.

A key part of the NC EB is that it creates a level playing field for all potential providers of balancing services, including demand side response and intermittent sources, and introduces a standardised set of rules. Anyone will be able to offer to provide balancing resources with the most cost effective offers being used by the transmission system operators (TSOs).

The NC EB will encourage a greater number of parties to offer balancing services, which will in turn create larger and more competitive balancing markets.  A recent study for the European Commission indicates a saving of €100m per year by 2015 from sharing balancing reserves.  This benefit is estimated at between €300m and €500m per year by 2030¹.

The Network Code on Electricity Balancing (NC EB) covers all aspects of the balancing market. The NC EB provides a framework for the continuous integration of national balancing markets to regional and pan-European markets. It does so by establishing rules on how transmission system operators (TSOs) procure balancing services, how these services are activated, shared and exchanged across borders and how TSOs obtain the necessary cross border transmission capacity.

As this exchange of balancing services entails a financial flow between providers, the code also creates the rules on how these services are financially settled, both between TSOs and with balancing service providers and balance responsible parties, to ensure a level playing field for all market participants.

Transmission system operators across most of Europe mainly use three categories of reserves to keep the grid balanced - primary, secondary and tertiary reserves.

The Network Code on Electricity Balancing (NC EB) sets out rules for the procurment, exchange, activation and settlement of three types of secondary and tertiary reserves. These three types - manually activated Frequency Restoration Reserves, automatically activated Frequency Restoration Reserves and Replacement Reserves - differ predominantly in the way they are activated (manually or automatically) and in the activation time and duration.

More information on the reserve types can be found in the Network Code on Load Frequency Control & Reserves section