Passive balancing

Commissioned by multi client

Lion Hirth, Ingmar Schlecht, Jonathan Mühlenpfordt, Anselm Eicke

2023

Market parties bet on the imbalance settlement price, taking positions that tend to counteract the system imbalance and thereby stabilize the grid. This practice has lower entry barriers than balancing reserves, continuously incorporates new information, and rewards forecasting innovation – arguably a key reason Germany’s balancing reserve demand halved while wind and solar capacity quintupled. In this study for a group of market parties, we explain the mechanisms, address the concerns raised against “passive balancing,” and recommend clarifying its legal status and publishing the German system balance in near real time. This report was originally published in German.