Romania’s surge in renewable energy production capacities comes with a critical challenge: imbalances. From the producer’s perspective, an imbalance occurs when the actual output deviates from the forecasted or contracted supply. For solar and wind farms, whose output depends on weather and is hard to predict with precision, such deviations are common. Changes in sunlight or wind speed can cause a renewable plant to generate significantly more or less power than expected, leading to imbalances that must be corrected in real-time to keep the grid stable. The management of these imbalances by the Transmission System Operator (TSO) involves certain costs that are subsequently allocated to Balancing Responsible Parties (BRPs) (in Romanian: Parti Responsabile cu Echilibrarea or PRE) according to specific market mechanisms.
For renewable energy producers and investors, imbalances introduce financial risk – a solar or wind farm’s revenue can be eroded by imbalance charges, which can be significant. Therefore, understanding the causes and consequences of imbalances, as well as the appropriate mitigation strategies, is paramount for any renewable energy project in Romania.
Deconstructing Imbalances
Concept
Essentially, an imbalance quantifies the deviation (in MWh) between a BRP’s metered net position and its contractual net position over a specific 15-minute settlement interval. Imbalances are calculated separately for each settlement interval of a delivery month.
The metered net position is mainly the difference between the total net output of all electricity producers for which the BRP has assumed balancing responsibility and the total net consumption of all electricity consumers for which the BRP has assumed balancing responsibility, in each settlement interval. Production and consumption are determined based on the values measured by the measurement systems.
The contractual net position means the difference between the contractual delivery obligations of a BRP and the contractual purchase obligations of that BRP in each settlement interval. This is determined based on notifications submitted by the BRP to the TSO, in accordance with the applicable rules.
A positive imbalance means a surplus and occurs when a BRP has produced/delivered more or consumed less than it has notified. Conversely, a negative imbalance signifies a deficit and occurs when a BRP has produced/delivered less or consumed more than notified.
Key Entities
The processes related to imbalances involve a collaboration between several entities operating in the electricity market, each with distinct roles and responsibilities:
Balancing Responsible Parties (BRPs)
A BRP is a market participant that assumes financial responsibility for the imbalances it generates within the energy system.
To operate in the Romanian electricity market, each market participant must be registered as a BRP with the TSO and enter into a formal agreement that outlines its rights and obligations concerning imbalances. A market participant registered as a BRP may also transfer its balancing responsibility to another registered BRP, in which case the latter manages the obligations vis-à-vis the TSO on behalf of itself and of all market participants for which it has assumed balancing responsibility.
The fundamental role of a BRP is to maintain equilibrium between its production, consumption, and energy exchanges, including imports and exports, and to bear the financial consequences of any imbalances.
The regulatory framework identifies several types of BRPs: Registered BRPs, Suspended BRPs, Active BRPs, and Temporary BRPs, the latter specifically designated for generating units undergoing a testing period.
Transmission System Operator (TSO)
The TSO in Romania is CNTEE Transelectrica S.A. Its overarching responsibility encompasses the operation, maintenance, and strategic development of the national electricity transmission grid. It also ensures the integrity, safety, and quality of electricity across the National Power System and manages the balancing market.
Wholesale Energy Market Metering Operator
The Wholesale Energy Market Metering Operator (in Romanian: Operatorul de Masurare al Energiei pe Piata Angro or OMEPA) is an organizational entity within CNTEE Transelectrica S.A., with several critical duties in the field of metering of the electricity transmitted through the National Power System. From the perspective of calculating and settling imbalances, one of the fundamental roles of this operator is to collect, process, and publish the metered data used to determine the metered net position of each BRP.
Imbalance Settlement Operator
The Imbalance Settlement Operator (in Romanian: Operatorul de Decontare al Dezechilibrelor Partilor Responsabile cu Echilibrarea or ODDPRE) is an organizational entity specifically designated for the determination and settlement of BRP imbalances. This vital function is, in practice, carried out internally by CNTEE Transelectrica S.A. The Imbalance Settlement Operator is tasked with performing all the complex calculations required to determine the system imbalance, the costs and revenues associated with system balancing, the initial and final imbalance prices, the BRP imbalances, and the payment obligations/collection rights of each BRP. It is also responsible for issuing the settlement documentation, which serves as the basis for payment and collection processes related to imbalances.
How Imbalances Are Calculated and Settled
Under Romania’s balancing market rules, the calculation and settlement of imbalances follow a structured process defined by the regulator (Autoritatea Nationala de Reglementare in Domeniul Energiei or ANRE) and implemented by the TSO and the other entities mentioned above. The process involves the following relevant operations:
Calculation of the BRP imbalances: The BRP imbalance is calculated as the difference between the metered net position and the contractual net position of that BRP in each settlement interval, as outlined in the previous section. If the BRP in question has assumed balancing responsibility for other market participants/other BRPs, the imbalance of that BRP will also encompass (aggregate) the individual imbalances of those other market participants/BRPs.
Calculation of the imbalance prices: As a general rule, provided certain conditions are met, a single imbalance price per settlement interval is calculated, applicable to both deficit and surplus imbalances. However, if the conditions for the single imbalance price are not met, the two-imbalance price method applies. This method involves calculating separately a deficit price and a surplus price. That is why, in certain intervals of the delivery month, there can be single prices for both deficit and surplus imbalances, while in other intervals there can be dual prices – different prices for deficit and surplus.
Imbalance prices depend on the direction and severity of the system imbalance, the volume and cost of activated balancing energy, and the type of services used, reflecting the real-time value of restoring balance in the power system. These prices can be significant in certain intervals.
If the imbalance is positive and the imbalance price is also positive, then the TSO pays the corresponding amount to the BRP.
If the imbalance is positive and the imbalance price is negative, then the BRP pays the corresponding amount to the TSO.
If the imbalance is negative and the imbalance price is positive, then the BRP pays the corresponding amount to the TSO.
If the imbalance is negative and the imbalance price is negative, then the TSO pays the corresponding amount to the BRP.
Establishment of the BRP collection rights/payment obligations: The financial consequences of the imbalances produced by each BRP - whether it must pay or is entitled to receive money – are determined for each settlement interval by multiplying the imbalance volume (in MWh) by the applicable imbalance price (in lei/MWh) set for that interval (single or deficit/surplus price).
For each delivery month and each BRP, the Imbalance Settlement Operator determines the value of the monthly amounts receivable and amounts payable corresponding to the imbalances recorded by each BRP. These are determined by summing the amounts receivable (for collection rights) and summing the amounts payable (for payment obligations) for all intervals of the delivery month.
The Imbalance Settlement Operator prepares and makes available to each BRP and TSO information notes for the monthly settlement of imbalances, including details of the imbalances recorded, the imbalance prices applied, and the payment obligations/collection rights.
Determination of the additional cost or revenue resulting from system balancing and its redistribution: Beyond individual imbalance payment obligations or collection rights, the Romanian market implements a mechanism for redistributing system-wide additional costs or revenues generated from balancing activities. The additional cost or revenue resulting from system balancing is determined monthly by adding the actual balancing costs (i.e., the costs of balancing resources activated) and the TSO’s monthly collection rights from BRPs, then subtracting the TSO’s monthly payment obligations to BRPs. If the resulting value is positive, it means the TSO incurred additional costs from system balancing; otherwise, the TSO incurred additional revenue.
This additional cost or revenue is redistributed to BRPs. The amount allocated to each BRP is determined based on its contribution in each settlement interval to the reduction or aggravation of the system imbalance. This mechanism serves to incentivize all BRPs to actively contribute to overall system balance, as their individual actions - or inactions - can impact the financial results for the entire system.
The Imbalance Settlement Operator prepares and makes available to each BRP and the TSO information notes for the settlement of the redistribution of additional costs/revenues resulting from system balancing for the respective month, which includes the additional amount allocated to the respective BRP.
Invoicing and payment: TSO and BRP settle their mutual payment obligations set out in the information notes for monthly settlement based on the corresponding invoices drawn up in accordance with the applicable regulations.
Internal Reallocation of Imbalance Costs and Revenues Within a BRP
While the imbalance calculation and settlement in Romania is performed at the aggregated level of each BRP, the financial responsibility for imbalances ultimately lies with each individual producer, consumer, or other market participant that is part (member) of the BRP (as mentioned above, a BRP may assume balancing responsibility for other market participants/registered BRPs). Therefore, another key aspect of balancing responsibility is the internal reallocation of imbalance-related costs and revenues among the BRP members.
Each BRP that assumes balancing responsibility for other market participants/BRPs typically establishes contractual arrangements or internal rules to allocate these costs and revenues to the participants that caused the imbalances. This internal distribution may be based on:
- Considering the individual imbalances produced by each member and adjusting deficit and surplus prices to reflect the settlement at the BRP-level;
- A sharing formula;
- A fixed or variable fee.
Causes and Impact of Imbalances
Causes
The primary cause of imbalances for renewable (in particular, solar and wind) producers is the variability and unpredictability of weather. Unlike conventional power plants, renewables cannot be perfectly controlled to match a set schedule. Even with advanced forecasting, it’s impossible to predict irradiance or wind speed with 100% accuracy for every 15-minute interval.
Another important cause is forecasting and scheduling errors. Producers must submit generation schedules to the TSO or their BRP. If these forecasts are inaccurate, the schedules will be incorrect, resulting in imbalances. Additionally, technical issues or outages in a plant can cause sudden drops in output, adding to the imbalance if the schedule is not adjusted in due time.
In summary, the intermittent nature of renewable energy production means that producers will always experience some degree of imbalance. The goal is to minimize this imbalance by using better forecasting and scheduling methods, making intraday adjustments, and employing other available tools. Another approach is to mitigate imbalance risk through aggregation or commercial arrangements such as power purchase agreements (PPAs) in which the offtaker assumes financial responsibility for imbalances in exchange for an equitable fixed or variable fee.
Impact
On a system level, the impact of imbalances is both operational and financial. When imbalances occur, the TSO must activate balancing resources to immediately ensure the system balance and that the frequency is restored within the normal operating parameters. These actions happen mainly on the balancing market, a specialized market where the TSO buys balancing energy in real time to correct imbalances. The prices on the balancing market are typically more volatile and can be much higher than normal energy prices when the system is under stress. Thus, the TSO incurs significant costs to maintain system stability, and these costs are ultimately recovered from the market participants that caused the imbalances through imbalance charges.
For producers, the immediate impact of imbalances is financial: if the producer deviates from the notified schedule, the difference will be settled at the imbalance price, which may be unfavorable. For example, if there is underproduction (negative imbalance), the producer may be required to pay for the missing energy at the single or deficit imbalance price. This price can be much higher than the day-ahead price or the price at which the producer sold its energy. Therefore, the producer incurs a loss on the shortfall. Conversely, in the case of overproduction (positive imbalance), the excess energy is settled at the single or surplus imbalance price, which may be even negative if the market was oversupplied (that is, a producer with surplus generation might actually have to pay for their excess energy).
Additionally, from an operational standpoint, the risk of imbalances forces producers to engage in active energy management: they need forecasting staff and tools, trading capability to make real-time adjustments, and possibly control systems – all of which add complexity for renewable producers.
Producers operating as their own BRP face costs of compliance: they must provide financial guarantees to the TSO to cover potential imbalances, and they need staff and systems for fulfilling their regulatory obligations.
In summary, the financial impact of imbalances on producers is seen in reduced revenues or additional costs, while the operational impact is seen in the need to manage forecasting, trading, and financial settlement. Both aspects make it clear that effective imbalance management is key to a successful renewable energy project in Romania.
Mitigating Imbalance Risks through Power Purchase Agreements (PPAs)
Given the financial risks associated with imbalances, renewable energy producers in Romania are increasingly looking for ways to mitigate these risks. One important tool for mitigation is the Power Purchase Agreement (PPA), which can be structured to allocate imbalance responsibilities in different ways. In a typical PPA, a generator agrees to sell a certain volume of energy (or all the energy produced) to a buyer (off-taker) at a fixed or variable price. The handling of imbalances under a PPA can vary:
In some PPAs, the producer might be responsible for delivering the energy produced and also for the imbalances generated. This scenario leaves the producer exposed to imbalance risk.
In other PPAs, especially those concluded with sophisticated or experienced off-takers, the latter essentially take over the responsibility for imbalances. The off-taker manages the forecasting, scheduling, imbalance settlement, and other related processes for the plant and guarantees a price for the producer’s energy that is free of imbalance charges.
The benefit of such a PPA to producers is clear: revenue stability and reduced operational hassle. The producer can budget its revenues without having to make large provisions for unpredictable imbalance costs. It also doesn’t need to invest in its own trading team or complex systems. Investors typically value this because it de-risks the project’s cash flow; the energy price in the PPA might be slightly lower than the market price to compensate the off-taker for taking on risk, but it converts an uncertain cost (related to imbalances) into a fixed cost or a deduction that is known upfront.
From the off-taker’s perspective, when professional traders or aggregators manage the energy (and imbalances) for several plants, they can often optimize across a portfolio. They might net-off imbalances between multiple producers, use advanced forecasting and dispatch tools, and trade on intraday markets to minimize final imbalances. This can reduce the total cost of imbalances compared to each producer handling it individually.
SPECTRADE is one such trader that specializes in energy trading services tailored for renewable energy producers. A key feature of our offering is the inclusion of imbalance costs in power purchase agreements. In practice, this means that when a producer partners with SPECTRADE, it enters into a contract where we take on the imbalance risks so the producer doesn’t have to worry about them. The producer receives a predictable price for its energy, and SPECTRADE handles the complex task of energy management and imbalance settlement.
In essence, SPECTRADE’s product aligns with the evolving needs of Romania’s renewable sector in the current market landscape.
Conclusion
Imbalances are an inherent part of renewable energy generation, especially in a dynamic market like Romania’s where solar and wind generation are growing rapidly.
For renewable energy producers and investors, understanding this landscape is critical. Imbalance costs can erode project profits and complicate operations, but they can be managed. Technically, solutions like better forecasting systems, intraday trading, or energy storage can help. Commercially, solutions like PPAs covering imbalances transfer the risk to specialized traders and may be a valuable tool too.