Imbalance settlement as part of the electricity market
The starting point of a functioning electricity grid system is that the alternating current frequency transmitted in the grid stays within nationally permitted levels, so a balance (or a state of near balance) must exist between electricity production and consumption at all times. The Transmission System Operator (TSO) maintains power balance through frequency-controlled reserves and manual regulations, which are made in the Nordic Balancing Market. The Nordic Balancing Market determines the up- and down-regulating prices for each hour. Up-regulation occurs when consumption exceeds production, whereas down-regulation occurs when production exceeds consumption. Up- and down-regulating prices determine the price used in the imbalance settlement for each hour.