The future relevance of electricity balancing markets in Europe - A 2030 case study

In the context of an increasing share of variable renewable electricity in the European generation mix the question arises to what extent electricity balancing markets will gain importance in the future. On the one hand, forecast errors of variable renewable electricity drive demand for balancing. On the other hand, transmission system operators across Europe progressively coordinate their actions in order to increase efficiency of balancing markets and thus mitigate the rise of imbalances. Against the background of uncertain future framework conditions, i.e. market design and the level of market integration, this paper aims to assess the relevance of electricity balancing markets across Europe for a set of scenarios in a 2030 context. We apply an established large-scale electricity market model of Europe to derive quantitative insights on market shares and revenues from day-ahead, infra-day and balancing markets. The results show that although the amount of balancing energy is expected to increase in the mid-term, the monetary volume of electricity balancing markets will still lay in the range of a few percent of day-ahead market volumes. The results also confirm that the relevance of this market segment is considerably impacted by the development of framework conditions, which also have distinct impacts on different countries and technologies.