Balancing prices and spreads are at highest ever levels

The charts show some interesting differences between NL, BE and France. Where the value of upward flexibility has increased with gas prices, Belgium and Netherlands see a much larger increase in value of downward flexibility than France.

Incredibly high spreads between highest and lowest balancing prices also feed into intraday trading. Belgium and Netherlands regularly see periods of over-supply, whereas this has been less frequent in France, especially in the last 2 years. Obviously this relates to low nuclear availability and a smaller share of renewable generation.

In Belgium, periods of oversupply are most frequent in the weekends. When demand is low, and there is a large baseload volume of nuclear (at least until Q4 this year) and solar and wind cause generation to exceed demand, resulting in low and even negative balancing prices.

In the Netherlands, the periods of oversupply are mainly solar driven and no longer limited to just the weekends.

In Belgium and the Netherlands, the volume of renewables pushes nearly all flexible generation 'out-of-merit', which means that the opportunity cost for providing reserves becomes high, due to low day-ahead prices (relative, of course). Flexible assets then 'stack' the availability revenues for ancillary services with day-ahead revenues to remain profitable.

For the morning and evening peak, when solar is low, conventional power is needed. When average day ahead prices are too low for long runs of conventional power, the startup costs may be too big a factor for them to come online. This means that only the plants that were already running to provide ancillary services are able to respond, causing scarcity of flex and thereby more extreme prices.

The combination of high opportunity cost for providing reserve capacity and the periods of scarcity of online flexible generation have driven balancing market volatility up massively.

The general price level of balancing is high due to current market circumstances, but the spread between highest and lowest prices is an indicator for the attractiveness of markets for storage and flexible assets.