In our previous article, “Deviation, Open-Book, and the Unpleasant Truth,” we showed that the difference between plan and reality—the deviation—is not a technical detail, but one of the key factors in operational economics. We continue this topic by examining the other side of the coin: how the deviation is actually balanced within the system and what role balancing services (SVR) play in this process. It is precisely around these services that many simplifications arise today. Not because they don’t work, but because they are often taken out of the context of the entire operation and its management.
We have already described the basic principle: each market participant declares in advance how much electricity they will generate or consume, but reality always deviates from this plan to a greater or lesser extent. These deviations are aggregated within the system and must be balanced in real time. In the Czech Republic, this role is fulfilled by ČEPS. When the system balance deviates, ČEPS activates sources capable of rapidly changing their output. And this is precisely where power balancing services come into play.
It is important to note that the entire system currently operates in 15-minute intervals. Each quarter-hour is a separate unit in which it is assessed who caused the deviation and who helped balance it. Even a brief fluctuation during the day thus has a concrete financial impact. In extreme situations, the price of balancing energy in a single quarter-hour can reach multiples of normal market prices.
How the SVR Auction Actually Works
From the operator’s perspective, SVR is not an abstract service, but a well-managed commercial mechanism. An auction takes place every morning, in which certified market participants take part. These participants must meet technical requirements, possess the appropriate technology, and be able to guarantee the delivery of power at the required time and quality—under a penalty regime.
Available power (positive or negative) is submitted to the auction along with a price bid. ČEPS then assembles the required volume of power starting from the cheapest bids and working upward until the necessary amount of system reserve is covered. This creates what is known as an SVR reservation.
But the process does not end there. In addition to the price for the reservation, there is also a price for the actual activation of the power. This applies when the source is actually used to balance the grid. In other words, it is one thing to be ready, and another to be actually activated. And it is precisely the combination of these two prices that forms the basis of the SVR’s economics.
From a strategic perspective, this creates a very interesting dilemma. If I set a high price, there is a smaller chance that I will be selected, but if I am, I will earn more. If I set a low price, I increase the probability of being selected, but at a lower unit revenue. This is no longer a technical discipline, but a purely business decision.
How SVRs Determine the Imbalance Price
The price of balancing energy, which is subsequently reflected in the imbalance settlement, is not determined randomly. It is the result of activating bids from these auctions. All activated bids are averaged over a given quarter-hour, and this price is further apportioned among market participants based on who caused the imbalance and who helped to offset it.
This leads to very specific real-world situations. In a single quarter-hour, the price may be relatively low, for example in the range of a few thousand crowns per MWh. A few hours later, typically during evening peak hours or when there is a shortage of available resources, it can reach tens of thousands of crowns. In extreme cases, values exceeding 80,000 crowns per MWh have even been recorded. For operations, this means one thing: an error in a single quarter-hour can undermine the economics of the entire day. And at the same time, it explains why such a strong wave of investment has formed around SVR.
Battery Storage and the “Klondike Effect”
It was precisely the extreme prices of balancing energy between 2022 and 2024 that sparked massive interest in flexible generation sources. A wave of projects involving battery storage, combined heat and power units, and diesel generators emerged on the market, primarily aimed at providing ancillary services.
The simplified logic was understandable. If such high prices arise during certain 15-minute intervals, all you need is a fast-responding source to capitalize on these situations. Market data show a clear trend. In 2021, balancing energy prices hovered around approximately 2,400 CZK/MWh. In 2022, there was a dramatic increase, and 2023 confirmed this trend. By 2024, a gradual stabilization was already visible, and today it is clear that prices are continuing to fall and investment enthusiasm is cooling.
The reason is straightforward: competition is growing. New sources are entering the market, including battery storage, which is ideal for this type of service. At the same time, the Czech Republic has joined cross-border mechanisms that allow for the purchase of balancing energy from abroad, such as from Germany or Austria. This increases supply and, logically, lowers the price. What looked like an exceptionally profitable segment just two years ago is gradually normalizing.
When a resource is "locked" for a single service
From an operational perspective, this brings us to the biggest problem with current practice. Many resources are currently configured to be dedicated almost exclusively to ancillary services, and from the perspective of overall operational economics, this is not always the best decision across the board. A typical example is a cogeneration unit that is blocked for SVR during certain hours and cannot be used for anything else.
This has several practical consequences. If the resource fails to win the auction and the operator has no procedure for utilizing the unit otherwise, it remains unused and thus constitutes a net loss. Conversely, if it does win, the operator does not know until the last moment when and to what extent it will be activated. This can fundamentally disrupt the heat or cooling balance. In practice, this means that the heating plant must cope with energy surpluses or shortages that arose outside its original plan. If such situations are not followed by a robust mechanism of subsequent optimization steps, a reactive mode arises that can completely eliminate the financial benefits of SVR.
Even more problematic are situations where a generation source is contractually bound to an aggregator that prohibits the source from being used for other trading instruments—such as the day-ahead or intraday markets. In such cases, a flexible asset becomes a tool used solely for a single purpose.
SVR – The Most Demanding Discipline
Support services are among the most demanding disciplines in the energy sector. They place high demands on technology. The source must be capable of rapid ramp-up and high flexibility. This in itself leads to higher wear and tear. At the same time, there are high risks involved. If the source fails to deliver the contracted output, penalties apply.
And paradoxically—comparable results can in some cases be achieved by other means. For example, through precise trading on the day-ahead market, without the need for certification, without extreme demands on technology, and with lower risk. Yet many investors head straight for SVR without taking advantage of these simpler and more stable paths.
A recurring theme emerges from interviews with plant operators. SVR often gives the impression that a power plant is profitable, but when looking at the overall economics, this may not be the case. A typical situation: a power plant makes a profit on a support service, but at the same time incurs higher costs elsewhere. This could involve higher fuel consumption, increased maintenance costs, or the need to balance the budget using other, less efficient power plants. In an extreme case, it would be cheaper not to start the power plant at all and to use another part of the technology instead.
This contradiction arises precisely because only one part of the economy is being monitored. SVR is evaluated in isolation, without regard to the rest of the operation. And this results in the loss of the ability to manage the whole system.
The True Value of Flexibility
A fundamental shift in thinking occurs when a flexible resource is no longer managed according to a single service, but according to the opportunities of the entire market. This means comparing every day what makes the most sense at that moment: whether to enter the SVR auction, trade on the day-ahead market, utilize intraday trading, or optimize one’s own consumption.
This is precisely the principle underlying ORGREZ TRADE’s approach. The basic idea is simple: to refine control. The more precisely operations are controlled, the smaller the deviation, the lower the need for balancing energy, and the less pressure on the SVR. At the same time, this creates opportunities to generate revenue in other markets as well. Flexibility thus ceases to be one-dimensional. It is not merely a “source for ancillary services.” It is an asset with multiple potential uses, and its value arises precisely from choosing among them.
SVR as an important tool, not a silver-bullet solution
Ancillary services have a firm place in the modern energy sector. They are essential for grid stability, make sense for a range of technologies, and can be a very attractive source of revenue during certain periods. The problem does not arise when operations utilize them. The problem arises when the entire operation begins to adapt to them.
Experience from recent years is quite clear in this regard. The ancillary services market has undergone rapid growth, attracting new investments, new sources, and new players—and in doing so, it has begun to return to equilibrium. What was sometimes presented as a stable and predictable revenue stream is proving to be a dynamic variable that changes with competition, regulation, and grid behavior. Building an entire economy on it means accepting a risk that is not immediately apparent.
Today, the energy sector is not about a single technology, a single market, or a single service. It is about making daily decisions in an environment where prices, conditions, and opportunities change every fifteen minutes. An operation that aims to be economically stable cannot, therefore, seek a single “right” path. It must work with alternatives and continuously assess where its resources are creating the most value at any given moment.
This is precisely where the importance of systematic management—the foundation of the ORGREZ TRADE approach—is fully evident. It is not about maximizing a single service, but about refining decision-making as a whole. Comparing markets, working with operational realities, monitoring deviations, and deciding on each specific day whether a resource should be directed to the SVR, the day-ahead market, or remain in the self-consumption optimization mode.
SVR thus ceases to be the goal. It becomes one of the tools. And that is the essence of the entire change. SVR is not the only game in town. It is just one of the ways to monetize flexibility. Real value is created when a resource is not managed in isolation for a single service, but as part of an entire commercial and operational system capable of adapting to the market over time.