Gaming Strategies in European Imbalance Settlement Mechanisms
Seyed Soroush Karimi Madahi, Kenneth Bruninx, Bert Claessens, Chris Develder
TL;DR
The paper addresses the vulnerability that BRPs can exploit sub-quarter-hour price formation in European imbalance settlement by dispatching fast-response assets like BESS within each 15-minute ISP. It develops a bilevel optimization framework in which a BRP chooses minute-by-minute charging/discharging to maximize $\lambda E_{position}$ while a lower-level market clears balancing energy, and it solves the resulting MINLP via a piecewise-linear approximation and KKT reformulation using Gurobi. Case studies for Belgium and the Netherlands demonstrate concrete gaming strategies that can increase BRP profits by manipulating price-defining minutes, sometimes at the expense of system balance, and show that design choices (single vs dual pricing, regulation-state rules) shape profitability and price outcomes. The findings suggest market design refinements—such as shorter ISPs or revised BRP position calculations—to preserve the balancing objective while mitigating gaming incentives.
Abstract
Transmission System Operators (TSOs) rely on balancing energy provided by Balancing Service Providers (BSPs) to maintain the supply-demand balance in real time. Balance Responsible Parties (BRPs) can simultaneously deviate from their day-ahead schedules in response to imbalance prices, e.g., by controlling flexible assets such as batteries. According to the European Electricity Balancing Guideline, these imbalance prices should incentivize BRPs performing such implicit or passive balancing to aid the TSO in restoring the energy balance. In this paper, we demonstrate that BRPs are unintentionally offered the opportunity to exploit gaming strategies in European imbalance settlement mechanisms. This is enabled by a disconnect between sub-quarter-hourly dynamics that determine the imbalance prices and the financial settlement on a quarter-hourly basis. We illustrate this behavior in a case study of the imbalance settlement mechanisms in Belgium and the Netherlands. Our results reveal that, in both countries, BRPs can, in theory, exploit the imbalance mechanism by increasing the instantaneous system imbalance during minutes within the quarter-hour that determine the imbalance price while still contributing to restoring the system balance for the rest of the quarter-hour.