Balance Responsible Parties (BRPs)
‘Balance Responsible Party’ (BRP) in the electricity market is a market participant or its chosen representative responsible for its imbalances (Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, Article 2(7)).
It is underlined in Article 17(1) and (2) of the said Regulation 2017/2195 that each BRP must strive to be balanced in real time, and that BRP is financially responsible for the imbalances to be settled with the connecting TSO.
The same definition of the BRP is used in the so-called 'Winter Energy Package' (Article 2(2)(m) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)) and Article 2(14) of the Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast).
Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), Article 2(14) and Article 5
Article 2(14)
‘balance responsible party’ means a market participant or its chosen representative responsible for its imbalances in the electricity market
Article 5
Balance responsibility
1. All market participants shall be responsible for the imbalances they cause in the system (‘balance responsibility’). To that end, market participants shall either be balance responsible parties or shall contractually delegate their responsibility to a balance responsible party of their choice. Each balance responsible party shall be financially responsible for its imbalances and shall strive to be balanced or shall help the electricity system to be balanced.
2. Member States may provide derogations from balance responsibility only for:
(a) demonstration projects for innovative technologies, subject to approval by the regulatory authority, provided that those derogations are limited to the time and extent necessary for achieving the demonstration purposes;
(b) power-generating facilities using renewable energy sources with an installed electricity capacity of less than 400 kW;
(c) installations benefitting from support approved by the Commission under Union State aid rules pursuant to Articles 107, 108 and 109 TFEU, and commissioned before 4 July 2019.
Member States may, without prejudice to Articles 107 and 108 TFEU, provide incentives to market participants which are fully or partly exempted from balancing responsibility to accept full balancing responsibility.
3. When a Member State provides a derogation in accordance with paragraph 2, it shall ensure that the financial responsibility for imbalances is fulfilled by another market participant.
4. For power-generating facilities commissioned from 1 January 2026, point (b) of paragraph 2 shall apply only to generating installations using renewable energy sources with an installed electricity capacity of less than 200 kW.
Limited allowable derogations from balancing responsibility are set out in Article 5(2) and (4) of the Regulation (EU) 2019/943.
The role of BRPs in a liberalised European Union electricity market is comprehensively described in the Commission Staff Working Document accompanying the document Commission Regulation of 23.11.2017 establishing a guideline on electricity balancing {SWD(2017) 383 final}.
Simply put, BRPs - such as producers and suppliers - keep their individual supply and demand in balance in commerical terms.
Given the market players have an implicit responsibility to balance the electricity system, the BRPs are financially responsible for keeping their own position (sum of their injections, withdrawals and trades) balanced over a given timeframe (the imbalance settlement period).
The remaining short and long energy positions in real-time are described as the BRPs' negative and positive imbalances respectively.
If a participant has a short position, this means that the difference between the contractual value and metered position has contributed to a deficit of electricity flowing into the system.
If a participant has a long position, this means that the difference between the contractual value and metered position has contributed to a surplus of electricity flowing on to the system.
Depending on the state of the system, an imbalance charge is imposed per imbalance settlement period on the BRPs that are not in balance.
This defines the imbalance settlement, which is a core element of balancing markets.
It typically aims at recovering the costs of balancing the system and may include incentives for the market to reduce imbalances – e.g. with references to the wholesale market design – while transferring the financial risk of imbalances to BRPs.
The terms and conditions related to balancing require that each balancing energy bid from a Balancing Service Provider (BSP) is assigned to one or more Balance Responsible Parties (note however, that not all BRPs in all EU Member States are also BSPs, BRPs which are not BSPs are therefore exposed to high risks without being able to benefit from high balancing energy prices at the same time).
ACER Decision No 03/2022 of 25 February 2022 on the amendment to the methodology for pricing balancing energy and cross-zonal capacity used for the exchange of balancing energy or operating the imbalance netting process) reviews the operating conditions for BRPs in the current, stressed market environment - as perceived by significant stakeholders.
In particular, German regulator, BNetzA, raised concerns that the protection of BRPs against high prices is essential for the efficient functioning of the market.
According to BNetzA, BRPs will pass on high imbalance settlement prices to their customers or, in case that this is not possible, will go bankrupt. This particularly affects BRPs with a volatile portfolio, which by nature cannot be forecasted as accurately as conventional portfolios.
If these BRPs were not protected from excessively high imbalance settlement prices, there would be a risk of substantially increasing the cost of renewable energy, which would impede the efforts of the EU to promote renewable energy sources.
In turn, Spanish CNMC argued that, in scarcity situations, whether the scarcity is real, forced by BSPs or caused by errors, balancing markets are likely to be inefficient because BRPs are not flexible and cannot participate in the price formation, which is determined solely by the bids of BSPs. In these circumstances, BSPs are not given the incentive to submit cost-efficient bids but see the possibility of maximizing their profits.
It was, moreover, observed that the balancing energy prices should have a signalling effect that incentivises both BSPs and BRPs to adjust their behaviours as a response to market conditions.
This is reflected in the balancing settlement principles - in particular, pursuant to the EU Electricity Balancing Regulation, the imbalance settlement must provide incentives to BRPs to be in balance or help the system to restore its balance.
According to Article 18(6) and (7) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, the terms and conditions developed by each Transmission System Operator (TSO) for BRPs must contain:
(a) the definition of balance responsibility for each connection in a way that avoids any gaps or overlaps in the balance responsibility of different market participants providing services to that connection;
(b) the requirements for becoming a BRP;
(c) the requirement that all BRPs must be financially responsible for their imbalances, and that the imbalances be settled with the connecting TSO;
(d) the requirements on data and information to be delivered to the connecting TSO to calculate the imbalances;
(e) the rules for BRPs to change their schedules prior to and after the intraday energy gate closure time;
(f) the rules for the settlement of BRPs;
(g) the delineation of an imbalance area and an imbalance price area;
(h) a maximum period for the finalisation of the settlement of imbalances with BRPs for any given imbalance settlement period;
(i) the consequences in case of non-compliance with the terms and conditions applicable to BRPs;
(j) an obligation for BRPs to submit to the connecting TSO any modifications of the position;
(k) the settlement rules;
(l) where existing, the provisions for the exclusion of imbalances from the imbalance settlement when they are associated with the introduction of ramping restrictions for the alleviation of deterministic frequency deviations.
ENTSO-E Supporting Document for the Network Code on Electricity Balancing of 23 December 2013
Role of Balance Responsible Parties
In order to be balanced or help the system to be balanced according to the provision defined by the terms and conditions of each TSO, each Balance Responsible Party (BRP) shall be entitled to change its Position in the Intraday timeframe until the Intraday Cross Zonal Gate Closure Time basing on rules and criteria defined by its Connecting TSO. In this case each BRP is obliged to respect specific rules and criteria as defined in terms and conditions of each TSO. Any modification of the Position declared by the BRP shall be submitted to the Connecting TSO if specified in accordance with the terms and conditions by each TSO. TSOs shall not be obliged to accept a change of Position by a BRP after the Intraday Cross Zonal Gate Closure Time.
Some market designs rely on BRPs Positions being frozen prior to delivery; others allow for notifying intra-zonal trades after delivery which may help intermittent generation and Demand Side Response to participate in short time (bilateral) markets. TSOs that do not allow for ex-post notification are not obliged to do so and can continue current practice and those TSOs that do allow for ex-post notification are also allowed to continue current practice, even if it is not an obligation.
A BRP is financially responsible for the residual imbalances of its perimeter (portfolio) after the process explained above concerning the modification of Position.
TSOs are entitled to require BRPs to have a balanced Position after the day ahead process and this requirement would be included in the terms and conditions related to Balancing. This possibility is particular important for TSOs interacting with BRPs that only trade (i.e. have no portfolio of physical injections or withdrawals and hence no Allocated Volume). For those BRP's a balanced Position means that in their commercial trade schedules sales equal purchase. Without this requirement there would be volumes of energy unaccounted for in the system at this stage.
Each connecting TSO may include in the proposal for the terms and conditions for BRPs specific requirements with regard to the position of BRPs submitted after the day-ahead market timeframe to ensure that the sum of their internal and external commercial trade schedules equals the sum of the physical generation and consumption schedules, taking into account electrical losses compensation, where relevant.
The provision by a BRPs of a balanced position at the end of the day-ahead timeframe and the provision of modifications of the position of BRPs may be temporarily suspended by TSO in situations indicated in Article 35 of the Commission Regulation (EU) 2017/2196 of 24 November 2017 establishing a network code on electricity emergency and restoration - NC ER).
According to Article 15(1) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, Distribution System Operators (DSOs), TSOs, BSPs and BRPs are required to cooperate in order to ensure efficient and effective balancing.
The ENTSO-E proposed that each Balance Responsible Party would have the right to change its position prior to intraday cross zonal gate closure ttime.
In addition, pursuant to ENTSO-E, each Balance Responsible Party would have the right to change its position after the intraday cross zonal gate closure time provided it was accepted by its Connecting TSO.
The Agency for the Cooperation of Energy Regulators (ACER) in its Recommendation No 03/2015 of 20 July 2015 on the Network Code on Electricity Balancing suggested that BRPs should have the right to change their position before the intraday cross-zonal gate closure time without specific conditions (such conditions may only apply in case of Central Dispatch Model), and were necessary, they can be allowed to change their position after the intraday cross-zonal gate closure time subject to specific national terms and conditions related to balancing.
The problem has been finally determined in Article 17(3) and (4) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing - as in the box.