Background: Imbalance market, control states and pricing

In the electricity market, supply and demand must be balanced at all times. When more or less electricity is produced than consumed, an imbalance occurs. TenneT, the Dutch national transmission system operator, monitors this balance and intervenes with balancing power (aFRR) when necessary. This leads to an imbalance price: a settlement price per quarter-hour, based on the most expensive activated measure to restore the balance. In case of a shortage (underproduction), upward regulation is required and the imbalance price is positive; in case of a surplus (overproduction), downward regulation is applied and the price may become negative. These price signals encourage market parties to contribute to the system balance: either by increasing production or reducing consumption during shortages, or reducing production/increasing consumption during surpluses.

TenneT uses various control states to indicate the system’s condition each quarter-hour. Control state -1 indicates a surplus (downward regulation), control state +1 indicates a shortage (upward regulation). In both cases, one imbalance price applies to the entire 15-minute period. Control state 0 means no balancing power was activated; the system remained stable on its own. The situation becomes more complex in control state 2: the system swings from a surplus to a shortage (or vice versa) within a single quarter-hour. This results in dual pricing: separate prices for upward and downward regulation. Market participants causing imbalances during control state 2 may be financially penalised – instead of being rewarded, they might be charged. The actual control state and associated prices are only known after the quarter, making real-time reactions risky.

A growing number of market players are responding to imbalance prices without being explicitly activated. This is called passive balancing: producers or consumers voluntarily adjust their output or demand based on anticipated price signals. They do not trade on a market but intentionally adopt an imbalance position to profit from price differences. A wind farm, for example, may curtail production at highly negative prices to avoid paying for excess generation. A battery may charge when prices drop below -€ 100 per MWh and discharge above € 300 per MWh. Passive balancing can help stabilise the grid without TenneT’s direct intervention – in fact, most imbalances today are resolved this way. However, uncoordinated and simultaneous reactions can cause new imbalances.

What changes in 2025?

This summer, TenneT will implement a major change in how real-time imbalance information is shared. The publication delay of the system imbalance signal (“balansdelta”) will be reduced from 5 to 2 minutes. As a result, market participants will get near real-time insight into the system status and indicative prices, allowing quicker responses.

Moreover, TenneT will significantly increase the granularity of price data. Instead of publishing imbalance prices once per minute, prices will now be updated every 12 seconds. That means 300 data points per hour instead of 60. This higher resolution provides clearer visibility into short-term price fluctuations. Previously, sharp price movements within a minute could be averaged out; now each 12-second window will show a separate value. TenneT plans to implement this change during weeks 27 or 28 of 2025 (late June to early July).

By reducing delay and improving granularity, TenneT hopes to refine market dynamics. Faster, more accurate signals should reduce overreactions. Instead of lagged responses or guesswork based on outdated information, participants can make smoother adjustments. TenneT expects this will reduce the number of control state 2 intervals. The new approach also returns the system to the more transparent pre-December 2024 standard.

Why this change? A look back at 2024

In December 2024, TenneT took the opposite approach by increasing the data delay from ~2 to 5 minutes. This was a response to growing instability in the imbalance market, especially the sharp rise in control state 2 intervals – from 8% of all quarter-hours in 2023 to 17% in 2024. In January 2025 this rose above 20%, reaching 31.8% in June. These events reflected dangerous swings in supply and demand. TenneT warned that Dutch imbalances were so extreme they affected the frequency of the entire continental European grid.

The issue stemmed from market behaviour within the quarter. With the growth of volatile renewable generation and sharper price spikes, passive responses to imbalance prices became more appealing. When prices surged, many participants injected extra power or curtailed consumption – sometimes all at once. Without coordination, this led to overcorrections: from deficit to surplus within minutes.

TenneT then had to rapidly switch from upward to downward regulation. This frequent seesaw effect made the balancing process more costly and unstable. Participants hoping to earn from imbalances could end up paying instead. Control state 2 forced TenneT to activate both types of reserves within one quarter – a symptom of inefficiency.

The temporary delay was intended to obscure the price signal, reducing knee-jerk reactions. By forcing participants to act with less certainty, TenneT hoped to smooth out volatility. The delay was introduced for six months as an emergency measure.

However, this did not have the desired effect. Control state 2 frequency increased further. Some parties may have continued reacting based on estimated or indirect signals. The reduced transparency made it harder for the market to respond constructively. Meanwhile, extreme price peaks and troughs still occurred – including a record imbalance price of € 3,990 per MWh in une and negative prices below –€1,000 per MWh.

That’s why TenneT now reverses course, aiming instead for better information quality. By sharing more timely and granular data, participants can adjust more precisely. This should reduce overcorrections and restore balance in a more cooperative manner.

Impact on market participants

• Large producers (e.g., gas plants, wind farms) will benefit from improved visibility. Although slower to respond than batteries, they can plan capacity changes more effectively and reduce financial risk from unexpected pricing. They will need systems capable of processing 300 data points per hour.
• Small producers (e.g., MKB-CHP units, agricultural biogas) may benefit indirectly through their Balance Responsible Party (BRP) or aggregator. With better tools, these intermediaries can optimise smaller assets more confidently.
• Storage operators are clear winners. Fast-reacting battery systems can capitalise on short-term price swings and adjust strategy in real-time. Better data helps them avoid overshooting and improve returns, while supporting system balance.
• Traders and aggregators will need to update systems and trading algorithms to respond to the 12-second signal. Those who left the imbalance market due to uncertainty may now return. The increased transparency allows for more sophisticated, risk-aware strategies.

Opportunities and risks

• Faster response times enable better balancing and revenue opportunities for flexible assets. However, parties without automation may fall behind.
• Fewer control state 2 intervals reduces financial risk and improves frequency stability. But actual impact depends on participant behaviour. If extreme reactions persist, additional measures (e.g., ramp rate limits, penalties) may still be needed.
• Passive balancing becomes more attractive – but must be done responsibly. If many players react identically and simultaneously, volatility may still occur. Regulatory interventions remain possible if self-regulation fails.

Conclusion and recommendation

TenneT’s decision to shorten the data delay and introduce high-frequency pricing marks a return to transparency and a step forward in system resilience. The changes should reduce instability, enable smarter decisions, and foster cooperation between TenneT and market participants.

Recommendation: All market actors should prepare for a new reality in which data granularity and responsiveness matter more than ever. Invest in infrastructure that can handle rapid updates. Recalibrate trading and dispatch strategies. Train teams to interpret fast-moving price signals. Collaborate actively with your BRP or service provider.

This transition brings opportunities – not only to improve financial outcomes but to support a more stable and sustainable energy system for the Netherlands and Europe as a whole.