Balancing Area Cooperation

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Introduction

Power system operators balance electricity supply and demand within geographic boundaries known as balancing areas. In areas without organized markets, exchanges of energy between balancing areas generally occur through pre-negotiated bilateral contracts between individual load serving entities, independent power producers, and even the balancing area authorities themselves. Increasing coordination between balancing areas can promote more efficient flows of energy and aid in the integration of wind and solar into power systems. For example, wind generation may increase in one balancing area at the same time that it decreases in another. With cooperation, these changes could cancel each other out. Enhancing balancing area cooperation gives power system operators more tools for increasing operational flexibility and can ease the integration of renewable energy.

Three common approaches to balancing area cooperation include:

    1. Reserve sharing. Power systems hold reserves to maintain reliability in the event of a plant failure or other unpredicted changes in supply and demand. Sharing reserves between balancing areas means each balancing area can maintain less reserve capacity. Reserve sharing is one of the simplest methods to decrease total reserve requirement and minimize the economic impact of power system uncertainty, which increases with increasing variable RE generation.
    2. Coordinated scheduling. Balancing area authorities can coordinate over longer time intervals by establishing a new central market, such as an energy imbalance market (EIM) or an electronic brokerage market, which facilitates bilateral exchanges.  Coordinated scheduling helps increase efficiency and can lead to the planned exchange of energy, not just when an unscheduled event occurs.  
    3. Consolidated operation. Consolidated operation is the merging of two or more balancing areas into a single entity with a larger geographic footprint. In some cases, the power system is operated in the same manner as before, but the increases and decreases in generation and demand are smoothed over the larger area, and the balancing area authority has access to an even greater supply of resources to help maintain balance. In other cases, the new entities within the merged balancing area may choose to establish a regional transmission organization (RTO) as a central hub for all transactions. With consolidated operation, the RTO optimizes the scheduling and dispatch of energy across all timescales. Consolidated operation provides the largest economic benefit from balancing area coordination.


Example Interventions

The following suggestions represent steps that power systems can take to increase cooperation between balancing areas through reserve sharing, coordinated scheduling, and consolidated operation.

  • Undertake grid integration studies to evaluate the operational impacts of increasing balancing area size and cooperation.
  • Convene stakeholder discussions to identify opportunities and institutional challenges for increasing balancing area cooperation.
  • Reserve sharing
    • Define type and technical parameters of reserve(s) to be shared.
    • Estimate total reserve requirement across balancing areas. Because of spatial diversity, the total reserve requirement is often less than the sum of the individual balancing area reserve requirements.
    • Estimate actual power flows that can occur at balancing area interfaces under various reserve sharing events. Compare the real power flows to transfer capacity, ensuring sufficient transmission exists to effectively share reserves. Monitoring systems can assist in ensuring adequate transmission capacity and alert system operators to reduce shared reserves when transmission capacity is insufficient.
    • Allocate reserve requirement to each balancing area. This allocation can be based on the proportion of demand and RE variability and uncertainty in each balancing area, as well as the relative frequency of contingencies and the ability of the generation fleet in each balancing area to provide reserve services.
    • Consider total annual flows of energy that may occur. As the amount of reserve sharing increases, there is a greater potential for energy exchange and associated costs. In this case, financial compensation mechanisms may be required.
  • Coordinated scheduling
    • Establish a system for continuous information exchange of generator availability and costs.
    • Create a monitoring system and financial compensation mechanism for energy exchanges and transmission usage.
    • Establish a means to calculate transmission adequacy on relevant timescales. This requires a transmission system owner/operator or some other organization to perform analysis of power flows and provide information about transmission availability to participants.
  • Consolidated operation
    • Key steps to establish an RTO or independent system operator include the elements described in coordinated scheduling as well as establishing a complete system of governance and market monitors to examine and mitigate potential market power issues.  


Key Video

Facilitating the Integration of Renewable Energy through Balancing Area Cooperation

Greening the Grid

This five-minute animated video illustrates how cooperation between power systems can facilitate the integration of variable renewable energy (VRE) to the grid. 


Reading List and Case Studies

Examination of Potential Benefits of an Energy Imbalance Market in the Western Interconnection

National Renewable Energy Laboratory, 2013

An EIM is a coordinated scheduling strategy that can address real-time energy imbalances between supply and demand and help address unexpected changes in wind and solar generation. This study evaluates the benefits of an EIM in the Western Interconnection of the United States and compares the benefits of an EIM with full participation and an EIM with a reduced level of participation. The results of the study indicate a benefit associated with moving to a sub-hourly dispatch interval as well as increased operating benefits from full participation in the EIM. The study also identifies unit commitment and dispatch challenges associated with the lack of contractual agreements among generators, transmission providers, and load-serving entities.


Analysis Methodology for Balancing Authority Cooperation in High Penetration of Variable Generation

Pacific Northwest National Laboratory, 2010

This report overviews several strategies for balancing area cooperation and coordination (including reserve sharing, coordinated scheduling, and consolidated operation) and identifies the merits and limitations of each strategy. The report is intended to offer tools and methodologies to help select the most appropriate balancing area cooperation methods. The report also discusses metrics to quantify the benefits of balancing area coordination that take into account capacity, ramp rate, ramp duration, and energy requirements for regulation, load following and scheduling, etc., as well as the robustness of generation and storage units within individual balancing areas.

 

Exchange of balancing resources between the Nordic synchronous system and the Netherlands / Germany / Poland

SINTEF Energiforskning AS, 2008

Motivated by the increasing needs for balancing services due to the rapid expansion of renewable energy, this technical report documents the balancing management and reserve market practices in the Nordic synchronous area (comprising system operators in Norway, Denmark, Sweden and Finland), Germany, the Netherlands and Poland. The report provides a detailed overview of grid interconnections among the separate northern European synchronous systems and proposes potential market models for exchange of reserves and integration of balancing markets via existing transmission lines.

 

Load Dispatch and System Operation Study for Central Asian Power System

Mercados, 2010

This report focuses on the central Asian power system (including Uzbekistan, Southern Kazakhstan, the Kyrgyz Republic, Tajikistan, and Turkmenistan). While the Central Asian Power System (CAPS) previously operated as a single balancing area, conflicting national priorities in the post-soviet period led to countries withdrawing from parallel operations and focusing on energy independence. Though it does not explicitly address renewable energy integration, the paper assesses the risks, opportunities, and benefits of an integrated regional system and finds significant economic and security benefits in an integrated approach. The study also identifies and proposes solutions to the existing economic, regulatory and political challenges for intergovernmental coordination. 


Regional Coordination of Short-Term Operations: Integrating Balancing Markets

French Energy Regulatory Commission, 2015

This presentation by the French Energy Regulatory Commission to the International Energy Agency Expert Workshop on Regional Resource Adequacy provides arguments for the need to integrate EU balancing markets through cross-border coordination. System operators use balancing markets to ensure that supply is equal to demand in and near real time. This presentation suggests a series of regulatory steps and an institutional framework that can foster a Coordinated Balancing Area (CoBA) in the EU. The CoBA would promote competition, reduce balancing needs, and ensure efficient balancing actions in light of increasing penetration of variable RE systems throughout Europe.  


Regulatory and Policy Examples

California ISO Energy Imbalance Market

California Independent System Operator, 2015

The California ISO (CAISO) webpage provides documents regarding the development of governance protocols for its EIM. The CAISO-operated EIM includes balancing authorities with customers in the states of Oregon, Washington, California, Utah, Wyoming, Idaho, Nevada, and Arizona. The documents on this page include issue papers, straw proposals, and stakeholder comments, among others. The process is being led by the EIM Transitional Committee stakeholder group, which is first evaluating the relationship between the ISO and the EIM governing body and developing criteria for evaluating governance proposals. The CAISO website also includes a webpage on foundational documents, including relevant FERC filings, draft and final tariff language, assessments of benefits, frequently asked questions, and training materials and information.


Coordinated Balancing Area in the European Union Internal Electricity Market

Glowacki Law Firm, 2014

This website provides contextual information on the key elements, actors, and process used to develop the Coordinated Balancing Area (CoBA) in the European Union. The CoBA will allow for sharing of balancing services and reserves between two or more transmission system operators. The CoBA is being developed within the framework of the Electricity Balancing Network Code under the auspices of the European Network of Transmission System Operators. It includes links to the Supporting Document for the Network Code on Electricity Balancing and information on cross-border electricity balancing pilot projects.


2013 State of the Market-Southwest Power Pool  (SPP) Market Monitoring Unit

Southwest Power Pool, 2014

This study, which focuses on the Energy Imbalance Service (EIS) Market formulated in the Southwest Power Pool (SPP), presents a comprehensive overview of the current capacities installed, energy demand and supply dynamics, and the impact of increasing wind generation on the system, among other technical and market aspects. The SPP EIS market footprint is comprised of 16 balancing authorities with customers in in the states of Nebraska, Kansas, Missouri, Mississippi, Oklahoma, New Mexico, Texas, Arkansas and Louisiana.  The study suggests a positive outlook due to a strong market performance and highlights transmission line congestion and increasing wind energy penetration as areas of concern for further attention.

 

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