Imbalance

Each party responsible for a set of meters has a scheduled position for every block, equal to the sum of its contracts and market trades. In Europe this party is called a balance responsible party. After delivery, metered energy is compared with that position. A party that produced more or consumed less than scheduled is long. A party that produced less or consumed more is short. The grid operator has already covered the gap by calling on reserves, and now charges for it.

The imbalance price is usually derived from what those balancing actions cost in the block. When the system as a whole is short, the price is high, so short parties pay heavily and long parties are paid well. When the system is long, the price falls, sometimes below zero. Some markets use one price for both directions, which rewards parties whose error happened to help the system. Others use two prices, so that any imbalance costs something. Settlement runs block by block and is usually billed weeks later.

Imbalance cost is the price of being wrong about your own output or load. For wind and solar it is a recurring cost per MWh. It depends on forecast quality and on how often the plant's errors point the same way as the system's. Lenders and offtakers ask who carries it. In a PPA, the party that holds balancing responsibility carries the risk, and the contract price reflects that.

Europe settles imbalance through balance responsible parties, now on fifteen-minute periods and mostly at a single price. In the US, imbalance is folded into the real-time market, where departures from the day-ahead award settle at the real-time nodal price. India calls it deviation settlement, with charges based on a reference rate plus regulated tolerance bands and penalties, set by CERC for inter-state entities and by each SERC within states.