The New Imbalance Cost in the Nordic Power Market and How to Deal With It

The four Nordic Transmission System Operators have changed the way power production imbalance is settled, including a change in the imbalance fee. What does this mean for Nordic power producers?


Nov 9, 2021

From 1 November 2021, Energinet, Fingrid Oyj, Svenska kraftnät and Statnett are using a harmonised ‘single-price’ model for imbalance settlement. For participants in the Nordic power market, this has important consequences.

All power producers commit to selling a given amount of power to the market. However, external factors can impact their ability to deliver the amount they have committed to. This creates an imbalance. For example, producers of wind power are at the mercy of the weather, and sudden shifts in wind levels can leave them with more – or less – production volume than anticipated.

The TSOs, being in charge of balancing the total production, are tasked with rectifying any deviations between what the power producers commit to producing, and what they are actually able to deliver.

Until 1 November 2021, the imbalance model meant that producers with a surplus faced a price below the alternative day-ahead price for their excess production, whereas producers with a deficit had to buy their missing volume at a price higher than the alternative day-ahead price.

The new model simplifies and harmonises the imbalance price structure for power producers. From 1 November, they face the same price regardless of whether they have to buy or sell an imbalance volume.

However, the new model also introduces a new fee structure which places increased importance on staying in balance.

Create value out of volatility

Power producers who are not in balance, now face a substantial imbalance fee. Naturally, this is something many are keen to avoid.

Trading away the imbalance in the intraday market not only reduces the downside of the imbalance but can also create additional value. As the imbalance fee is based on volume, an imbalance that can be traded away equals less downside.

The fee is especially harsh for small and medium players who don't have the resources to trade on the intraday market to limit their shortfall and surplus.

To trade on the intraday market, energy players need access to complex digital tools (forecasting & optimisation, data and market analytics tools) as well as experienced traders working around the clock.

But for a small company, it’s way too expensive to invest in the tools and the people. Smaller players in the power market without a dedicated trading desk would be forced to take the costly consequences of the imbalance, with no other option.

Volue makes the intraday market accessible to all

In May 2021, Volue introduced Intraday Access, the 100% transparent algo-trading service that opens the intraday market to all.

This is a service that allows small and medium-sized players in the power market to trade away their imbalance and capitalise on the constant market fluctuations.

With a dedicated trading desk, best-in-class algorithmic tools and a transparent model for sharing of profits, everyone can benefit from their imbalance.

See how Volue can help you trade away your imbalance.