Balance Responsible Party (BRP)

Balance Responsible Party (BRP)

If we lived in an ideal world, the electricity transmission network would always be in balance, and supply and demand for electricity would always be perfectly matched, with no imbalances and no blackouts. To achieve this, market participants would have to forecast their own consumption and production with 100% accuracy. Every day, every hour. As you may have guessed, this is not how the real world works. The difference between supply and demand is rarely zero, and we need someone to take financial responsibility. Such an entity, called BRP, settles any imbalance with the connecting transmission system operator (TSO, company ČEPS in the Czech Republic).

Golden rule: As a market participant, you are responsible for the imbalances you cause in the system.

Electricity suppliers and consumers have contractual agreements describing the amount of electricity to be bought and sold. In practice, however, these amounts can and do differ from what is produced or consumed. Such discrepancies need to be resolved to keep the grid in balance. The grid operator uses the system of balancing responsibility, which makes all market participants responsible for the imbalances they cause. This is where the BRP comes in.

BRP is responsible for balancing the difference between consumption and generation so that the difference is as close to zero as possible in each trading interval. In short, the BRP is responsible for its deviation from the market operator.

Since the BRP usually does not have online data on all its actual consumption/production, its deviation is not zero. The TSO imposes an imbalance charge on BRPs that are out of balance. The charge covers the TSO's costs of balancing the system - the market is incentivised to reduce the imbalance and transfer the financial risk to the BRPs.

EU regulation aims to ensure that BRPs are as exposed as possible to market price signals. Imbalance pricing is directly linked to system needs as all BRPs, regardless of their imbalance, are exposed to the same price. Therefore, they are incentivised to support the system imbalance by reducing the TSO's demand for balancing energy.

How does a Balance Responsible Party work?

The BRP first trades the scheduled difference between consumption and generation through the Market Operator, e.g. if the BRP has scheduled generation of 1MW and consumption of 2MW for hour H1, it tries to buy 1MW for that interval through the Market Operator to make up the difference. If the BRP finds that its actual generation or consumption differs from the planned volumes during the delivery day, it can still trade the differences on the intraday market.

The settlement of the differences is done by the market operator and sent to all BRPs on a monthly basis.

Let's look at an example:

Let's imagine an electricity supplier who buys electricity from a solar farm in an OTC transaction during a summer holiday. In this example, there is little demand from households because everyone is outside, but there is a lot of production because the solar farm is producing more than average. Assume that the supplier is also a BRP and its balancing group includes the supply from the solar farm, the demand from the connected households and trading on the electricity market with other BRPs.

This supplier is always responsible for its balance. The energy consumed must be higher for the projected production levels from the solar farm. At the same time, another BRP may be consuming more electricity than necessary. This could be due to high demand from a factory in the balancing group or an outage at a power generation facility. Both BRPs can exchange power to balance the difference and as much as is feasible in power trading. However, it's possible that it's more cost-effective to balance an energy surplus or deficit than to take action in the balancing group.

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