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Balancing services are used in Germany to balance short-term imbalances between electricity feed-in and electricity consumption, thereby maintaining a stable grid frequency of 50 Hz. These services are procured by transmission system operators (TSOs) in the form of three products: primary reserve (frequency containment reserve, FCR), reserve (automatic frequency restoration reserve, aFRR), and minute reserves (manual frequency restoration reserve, mFRR). This article provides an overview of the balancing services in Germany, as well as the development of system costs and required capacities for balancing services.

aFRR and mFRR are split into a power and energy market, while FCR only has a power market. The two energy markets for aFRR and mFRR were introduced in 2020. A detailed description of the mechanism (including infographics) can be found here, with an update on European harmonization efforts in the form of PICASSO and MARI here. This article focuses on the three power markets for FCR, aFRR and mFRR.

FCR to be provided by the German TSOs is determined annually in consultation with the other TSOs in the continental European interconnected grid. The total demand in the European interconnected grid is based on a reference disturbance of ±3,000 MW, which is distributed proportionally among the European TSOs according to their respective annual feed-in and load. The required capacity for aFRR and mFRR in the German grid area is carried out jointly by the four German TSOs using a probability-based method. This takes into account the probability of system imbalances and power plant failures occurring within defined periods. The probabilities of failure are statistically modeled for this purpose, including all power plants with a capacity of 100 MW or more. [1]

The following section first takes a closer look at the development of required capacity and system costs for FCR, aFRR and mFRR. Then the dependence of the FCR price on the day-ahead price (DA price) are analyzed. This is followed by an analysis of the daily characteristics of balancing services.

Development of system costs and required capacity for FCR, aFRR and, mFRR

The required capacity for mFRR has been declining sharply since 2014, while it has remained almost constant for FCR and aFRR.
System costs incurred by balancing services are subject to varying degrees of fluctuation.

A look at the required capacity for balancing services in Germany over the last 14 years shows that the volume of FCR and aFRR has remained almost constant or has only decreased slightly (see Figure 1). The constant trend in FCR capacity demand is due to the consistent demand assessment in the continental European interconnected grid, which is systematically set at ±3,000 MW in accordance with the reference disturbance. Various factors play a role in the required capacity for aFRR, which have opposing effects, resulting in a constant trend overall. Among other things, the expansion of renewable energies (RE) has an increasing influence. On the other hand, increasingly accurate RE forecasts, for example, reduce demand.

While the required capacity for FCR and aFRR has remained almost constant over the years, system costs are subject to significant fluctuations, with the costs FCR varying less than those of aFRR and generally being significantly lower. The highest annual FCR costs were reached in 2022 at approximately €112 million and almost halved the following year.

In comparison, the costs of aFRR have fluctuated significantly over the last 14 years. Between 2016 and 2020, there was a sustained low, with costs below €120 million per year. In the following years, however, costs rose sharply, eventually increasing to over €530 million by 2023. The significant increase in system costs for aFRR is primarily due to the energy crisis and the associated price increases for conventional energy sources, especially natural gas. In addition, the sharp rise in the price of CO₂ since 2020 is contributing to the increase in annual costs. This increase particularly affects aFRR, where significantly more provisioning of balancing service takes place than with FCR and mFRR and where thermal power plants in particular provide balancing service. After peaking in 2023, a decline to approximately €400 million is expected for the first time in 2024.

The annual system costs of mFRR show comparable fluctuations to those of FCR. However, the threshold of €160 million per year has not been exceeded in the past 14 years. Furthermore, a continuous decline has been recorded since 2021, resulting in system costs of €44 million in 2024, which is mainly due to the sharp drop in demand.

Figure 1: Development of system costs (bars) and required capacity (lines) for balancing services from 2010 to 2024

Relation of FCR and day-ahead prices

The following section analyzes the characteristics of FCR prices and how they are linked to the day-ahead (DA) market.

If we compare the hourly DA prices based on their respective daily averages with the corresponding FCR price for that hour (see Figure 2), we see a similar trend across all the years considered (2021–2024), resembling the so-called “bathtub characteristic” already discussed in this article. The high FCR prices during periods of low DA prices can be explained by the fact that fewer conventional power plants are connected to the grid during these periods, which can provide FCR. In order to provide FCR, conventional power plants must operate at partial load, which allows both an increase and a reduction in output. The energy from partial load operation is sold on the spot markets. Since DA prices are below the marginal costs of these power plants, economic operation is not possible, so many plants are shut down completely and cannot provide FCR. As a result of the reduced supply of FCR-capable power plants, scarcity on FCR market increases, which is reflected in correspondingly higher FCR prices.

As DA prices rise, FCR prices initially fall until they reach a minimum in the range of 0.9–1.5 of the daily average. As DA prices continue to rise, a slight, continuous increase in FCR prices can also be observed. This parallel price development in both markets underscores their correlation: higher DA prices increase the opportunity costs for providers of FCR, as feeding into the spot market becomes more attractive. In order to still create incentives for the provision of FCR, correspondingly higher FCR prices must be achieved so that participation in the control reserve market remains economically profitable.

Figure 2: Correlation of FCR price on relative day-ahead price intervals to the daily average for the years 2021 to 2024

Overview of balancing power prices – Analysis of daily characteristic

The last section takes a closer look at the intraday price behavior of all control power markets. Figure 3 shows the average prices for control power products from the primary reserve, secondary reserve, and minute reserve throughout the day, broken down by product type (positive/negative) for the year 2024. The marginal prices are shown for aFRR and mFRR. Unlike the FCR market, the aFRR, and mFRR control power markets use pay-as-bid as their pricing mechanism. Therefore, there is no uniform auction price.

Figure 3: Average daily characteristic for FCR, aFRR, and mFRR for the year 2024

For negative products, as well as FCR, high prices occur at midday and low prices in the evening hours. The high prices at midday result from the low available capacity of thermal power plants at this time. For positive products, on the other hand, the highest prices occur in the morning and evening hours, with a price decline at midday analogous to the day-ahead curve. Overall, the price curves for positive and negative balancing power are often asymmetrical to each other at midday.

A comparison of the three control reserve products – FCR, aFRR, and mFRR – shows that aFRR and mFRR are very similar in terms of their trends in both the positive and negative ranges, but at different levels. FCR, on the other hand, largely mirrors the pattern of negative control energy products in its trend.

Seasonal differentiation in intraday price trends clearly shows the influence of photovoltaic feed-in on price levels. In the sunny months from May to August, higher solar radiation and higher full-load hours lead to the highest PV power generation in the course of the year. These increased feed-in volumes and the resulting reduced availability of thermal power plants have a particular impact on the market for negative secondary reserves during the midday hours. During this period, prices of up to €58/MWh are reached (see Figure 4). In comparison, the price at the same time of day in spring and fall is only around €35/MWh, and in winter around €8/MWh.

Figure 4: Comparison of aFRR prices per product time slice for the summer, transition period, and winter seasons of 2024

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Further external links

Literatur:

[1] „www.regelleistung.net,“ 27 05 2025. [Online]. Available: https://www.regelleistung.net/de-de/Marktinformationen/Dimensionierung-Regelreservebedarf.