Czech balancing interval to be cut to a quarter, changing market participants’ operations and systems

The energy sector is undergoing the biggest transformation in its modern history, and many changes are still ahead. One major change concerns balancing, which aims to keep the system in balance so that the energy fed into the grid equals the energy withdrawn. Until now, the energy sector has worked with an hourly balancing period. Across Europe, new legislation will shorten this interval to a quarter of an hour. This fundamentally changes the rules of the game.

The existing period gave market players, typically traders, greater freedom to act. Their imbalance was calculated over the hourly interval as the difference between what they generated or bought and what their customers consumed. Within those 60 minutes, however, they could manage their position very flexibly, with large swings that place a strain on the system. They then only had to bring their position back within the required limits before the end of the 60-minute interval, so that the imbalance over the hour was as small as possible. When a large number of market participants behave this way, however, the result is oscillation across the entire system. With the significant increase in the number of renewable energy sources, keeping the system in balance is becoming increasingly challenging, and this kind of behaviour is all the more undesirable.

Four times as many offers

Shortening the balancing interval to 15 minutes will significantly limit traders’ ability to manage their positions, since it is technically much harder to move into more extreme positions while still achieving a balance with the contracted position in the quarter-hour assessment. And imbalances incur a substantial penalty.

In practice, this will mean a range of changes to how market participants operate and to their systems. Whereas traders have so far forecast hourly consumption, they will now have to switch to a period four times shorter. Generation will of course also need to be forecast much more frequently, which is no easy task precisely because of the renewable sources mentioned above.

The principles of trading are also changing. For example, on the day-ahead market run by the Electricity Market Operator (OTE), where trading takes place for the following day, participants could previously submit 24 volume and price values. With a quarter-hourly period, they will need to handle 96 values. This also means entering them differently; evaluating them will be more complex, and the format of messages exchanged with the Market Operator will be somewhat different.

Making room for it on screens—and in computing power

The scope of the changes brought about by shortening the balancing period is much greater than might seem at first glance. We realised this while preparing our products in the Lancelot range, which focuses on energy trading, for these legislative changes. These include Lancelot FMS, which offers traders a range of tools to forecast consumption and generation across their portfolio, and Lancelot ETRM, a system for managing risk in energy trading. For a 15-minute interval, all components of this software need to be adapted so that their outputs meet the new requirements. The visualisation layer also needed major changes: all the tables and charts—in short, the user interface, which must enable efficient work with 15-minute intervals. By way of illustration, the most common display used to be a 2D table, with days on the Y axis and hours on the X axis. It used to fit nicely on screen, because 24 values laid out horizontally are not that many. But now there will be four times as many.

With the switch to quarter-hourly intervals, performance also needs to be addressed, because shorter intervals once again mean much more data to process. For example, an annual chart will have 35,040 points instead of 8760. As a result, we adapted our entire energy platform and its individual products. You could say it was a change from the ground up, but we were helped by a high degree of standardisation and by a principle we strive to uphold in our Lancelot family of products—responding to market changes effectively and on time.

Smaller ripples in the energy pond

The transition to a shorter balancing period is being coordinated across Europe. Its significant impact is also reflected in the fact that large-scale tests with market participants are due to take place in the Czech Republic from around the middle of next year. The Electricity Market Operator is already reporting on them on its website.

In short, change is coming, and it will affect the entire trading framework and market behaviour. It will also have an impact across energy IT systems, without which it is difficult to imagine how a modern energy sector could function. The result should be greater system stability, because the limits on imbalanced behaviour will be defined much more precisely. But our customers have nothing to worry about, since we have prepared all our products for the transition to 15-minute intervals. All that remains is to wait for the desired effects this legislative change will bring.

About the author

Tomáš Koldcsiter

He has long worked on IT solutions in the energy sector. At NET4GAS, s.r.o., he first worked on managing and developing trading systems, particularly implementing Commission Regulations (EU) No 715, 984, 1348 and 312, which significantly changed the transparency of trading and the way capacity is allocated across gas networks in the EU. At Unicorn, he moved from the role of Business Architect, where he focused on analysing and designing IT solutions to support trading in electricity, gas and other commodities, to the position of Hub Manager, with responsibility for product solutions, particularly in the energy sector.