What balancing products are offered in Europe's real-time power markets and what systems automate them?
By
Paul Pontenagel
Over the last few months, we have seen an influx of interest and discussions around PICASSO, one of the real-time balancing platforms for Europe’s power markets. In this article, Time2Market’s power trading expert, Paul Pontenagel, discusses how the platform functions and why it has seemingly only recently become a point of interest in the industry.
The Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation (PICASSO) is the latest platform in the EU’s automated balancing suite, which functions by optimizing the automatic Frequency Restoration Reserve (known as the aFRR, more on that in the next section).
While PICASSO was first proposed in 2017, the first Transmission System Operators (TSOs) to access the platform were the German and Austrian TSOs in June of 2022. Since then, 10 TSOs have joined PICASSO with varying levels of success, which will be discussed later on in this article.
The PICASSO platform is a part of the EU’s larger project of harmonizing the energy markets on the continent. The goal for the platform is to create an EU-wide domestic market for balancing power, thus increasing the efficiency of the energy system and promoting social welfare.
Currently, the platform is used by Germany, Austria, Denmark, the Netherlands, the Czech Republic, and Belgium. According to the latest PICASSO Implementation Roadmap, most European countries are expected to join by the end of 2025.
PICASSO is a joint project, endorsed by the ENTSO-E Market Committee, and therefore all European TSOs, which are members of the ENTSO-E association. The association describes the following objectives of the platform:
The power grid in Europe is balanced by transmission system operators. They ensure that the transmission frequency on the grid does not deviate from 50Hz across continental Europe. While deviations caused by supply and demand occur all the time, there are many automated and manual systems, as well as balancing products, set in place to ensure these deviations can be corrected as quickly as possible.
While the EU is well on its journey toward establishing a harmonized power market, one of the areas where the national power markets differ greatly, is the balancing products each market offers to maintain a stable grid. The European Commission has classified 3 balancing products (known as Reserves) which still operate under different names and function differently across markets, even though they often have similar purpose.
EU countries display great differences in bidding behavior for each balancing product, which has been causing unexpected adverse effects when some TSOs have joined PICASSO.
In the EU, balancing products (Reserves) have different names in each national market, but are internationally known as the FCR (Frequency Control Reserve), the aFRR (automatic Frequency Restoration Reserve) and the mFRR (manual Frequency Restoration Reserve).
All countries in the EU use a standardized frequency regulation procedure when they detect a larger-than-safe deviation from the grid's transmission frequency of 50Hz. In the case of imbalance, the first reserve to be deployed is the FCR (Frequency Containment Reserve). The FCR is a fully automatic service with a rapid response in the 30 seconds after a frequency deviation is detected. This reserve ensures immediate frequency correction without the need for human intervention.
If the frequency deviation is not corrected by the FCR quickly enough, a secondary reserve, the aFRR (automatic Frequency Restoration Reserve) is automatically activated within the first 5 to 15 minutes after the first detected frequency deviation. This is the reserve that the PICASSO system harmonizes across EU member states.
If the imbalance persists, a tertiary reserve, the mFRR (manual Frequency Restoration Reserve) is manually activated within 15 minutes of the first detected frequency deviation. This reserve is also harmonized by an EU system.
An additional balancing product exists in some, but not all, EU power markets, called the RR (Replacement Reserve), which is also a manual product, activated when necessary, after the first 15 minutes of a detected frequency deviation. Once again, this product is harmonized by an EU system in the markets where it’s available.
With the notable exception of the FCR, all balancing products in the EU are harmonized by a separate balancing system: PICASSO, MARI, and TERRE. Let’s take a closer look:
The Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation (PICASSO) is the EU's balancing system, which optimizes the aFRR (automatic Frequency Restoration Reserve).
PICASSO was first proposed in 2017 and has been operational since 2022. Most EU member states are planned to join the platform by the end of 2025.
The Manually Activated Reserves Initiative (MARI) is a European platform for the management and optimization of mFRR (manual Frequency Restoration Reserve).
MARI was first proposed in 2019 and has been operational since 2022. Most EU member states are planned to join the platform by the end of 2025.
The Trans-European Replacement Reserves Exchange (TERRE) is the platform for the exchange of balancing energy from replacement reserves (RR).
TERRE was first approved in 2016 and has been operational since 2020. However, due to a new cross-zonal intraday gate closure time requirement, introduced in the EMDR (Electricity Market Design Reform), which contradicts the functional capabilities of the TERRE platform, the platform is expected to be decommissioned by the end of 2025.
Unlike the previously mentioned PICASSO, MARI, and TERRE, the International Grid Control Cooperation (IGCC) is the European platform for the imbalance netting process. The system prevents simultaneous activation of aFRR reserves between two TSOs in opposite directions.
IGCC has been operational as an imbalance netting platform since 2021.
With all background information now presented, let’s take a closer look at why PICASSO is much more widely discussed than other EU balancing systems.
Unlike MARI, TERRE and IGCC, who have all had comparatively smooth go-live dates and accessions of TSOs, PICASSO had perhaps one of the most unexpected adverse effects after TERNA, Italy’s TSO accessed the platform. This event has pushed many of the industry’s experts to analyze the situation or discuss it with local traders. Some TSOs have also postposed their joining the PICASSO system as a result of TERNA’s outcome.
It all boils down to each TSOs unique approach to all balancing products, and in this case, the aFRR. While the purpose and function of these products are largely defined by the European Comission, each TSOs philosophy varies greatly. Here are a few examples of approaches, which each TSO needs to define themselves:
Most TSOs that have joined PICASSO, have experienced some minor price fluctuations, which did not have undesirable consequences. The only notable exception is TERNA, Italy’s TSO. TERNA experienced major unforeseen balance price deviations. Currently, TERNA has withdrawn from the PICASSO platform, but remains part of the project and can begin operational participation. Due to TERNA withdrawal, some TSOs delayed their scheduled accession to the platform, namely the Netherlands, Belgium and the Baltic states. TenneT (NL) and Elia (BE) have since accessed the platform without adverse effects.
As of the date of writing this article, 10 TSOs from 7 countries are members of PICASSO: 50Hertz (DE), Amprion (DE), Tennet (DE), TransnetB (DE), APG (AT), TERNA (IT), Energinet (DK), TenneT (NL), SEPS (CZ), and Elia (BE).
They have joined PICASSO in the following order:
The launch of PICASSO brings significant changes for all market participants. For TSOs, it could mean access to a more liquid market with an expanded pool of aFRR providers, though they will need to integrate cross-border optimization into their operations. On the other hand, balancing energy providers and traders, while not directly linked to the platform, must adjust to the resulting shifts, such as updated bid requirements, greater market liquidity, and the emergence of international competition.
The implementation of balancing systems like PICASSO, MARI, TERRE, and IGCC marks a key step in the EU's ongoing journey toward a unified and harmonized power market. These systems are designed to stabilize the grid, foster healthy competition among market participants, and ultimately maximize social welfare, ensuring a more efficient and reliable energy supply for end consumers across Europe.
If you are interested in entering European power markets, you can book a meeting with Time2Market’s market access experts. You can read more about our services here.
Disclaimer: Time2Market ApS is not responsible for the completeness, accuracy, and actuality of the information provided. This article is intended for informational purposes only and should not be considered business or legal advice. The energy industry is extremely dynamic and counterparties change their requirements frequently. As a result, information discussed on this page is subject to change without notice.
This page has last been updated on
December 17, 2024
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