What are the pros and cons of 15-minute balancing in electricity markets?

What are the pros and cons of 15-minute balancing in electricity markets? 

Energy systems are becoming more decentralised and renewable-heavy market operators are transitioning from hourly to sub-hourly balancing intervals. 15-minute balancing (also known as 15-minute market settlement or real-time balancing) is an increasingly common approach in power markets, aimed at improving flexibility, reducing imbalances, and better aligning with variable renewable generation. Different regions have different approaches to how they tackle this shift. 

With market efficiency, grid stability, renewable integration, and operational costs all being cited as reasons for the change. But what is the 15-minute balancing system? 

Instead of occurring at the usual hourly measurement, in the 15-minute balancing system, activities occur every 15 minutes. This differs from hourly balancing because it allows more accuracy with supply and demand balancing, which is particularly important when considering the volatility of renewable energy generation. This is because the unpredictability of some types of renewable energy requires tighter control over demand and supply to ensure that energy bottlenecks and power outages don't occur. As the grid changes and upgrades, this granular level of reporting is key to a successful, renewable-heavy modern grid. 

Why are markets moving to 15-minute intervals? 

The migration to 15-minute markets is predominantly due to the need to facilitate the incorporation of renewable energy into the grid. As we see an increasing share of variable renewables entering the grid, these volatile sources of energy - such as solar and wind, which are governed by the weather - must be integrated into the grid using methods different from fossil fuels. Modern technology will be the key to this transition, incorporating digitalisation - including data analysis tools and the Internet of Things (IoT) to allow a connected grid with smart-grid readiness. 

The aim of this is grid stability—there is a crucial need for more precise alignment between generation and demand, and as energy demand increases, this can't be impacted by the volatility of renewable sources. 

Policy and regulation are driving these changes. Regulations in the EU Clean Energy Package encourage the use of 15-minute intervals and simplify trading rules to allow these more complex 15-minute activities to take place.  

Pros of 15-minute balancing 

If grid stability is at the heart of 15-minute balancing, what benefits can we see introduced as part of this more granular activity? One enabler of 15-minute balancing is that it encourages flexible resources like batteries and demand response mechanisms to be integrated into the grid. Batteries can help to level out the volatility associated with renewable energy, stabilising the grid even during extreme weather events such as droughts, supporting efficient dispatch of distributed energy resources, and ensuring low impact on demand.   

A more stable grid with closer, 15-minute balancing can ensure greater price transparency. Finer granularity leads to clearer price signals, making renewable energy a more desirable source to invest in and leading to more widespread adoption and development. 

15-minute balancing also encourages innovation: the granularity and accuracy enable new business models, such as peer-to-peer trading and automated trading, dynamic pricing and even AI-driven forecasting tools. 

5 key drivers for introducing 15-minute balancing: 

• improved grid efficiency 

• more accurate matching of supply and demand 

• reduced imbalance penalties for generators and buyers 

• better integration of renewables 

• aligns with real-time variability of wind and solar  

Cons of 15-minute balancing  

As balancing becomes more granular, and therefore more advanced, increased data processing and forecasting is required, including the need for more advanced IT infrastructure. This more modern iteration of the grid will incur implementation costs, including costly upgrades to metering and settlement systems to prepare the grid for closer balancing periods.  

As 15-minute balancing requires more frequent periodic activity, this could result in higher complexity for market participants, requiring expert guidance or legal advice. 

The consequence of a more complex market involvement is the introduction of regulatory and operational challenges. Governments globally would need to streamline policy and regulation to ensure harmonisation across regions and balancing areas. Coordination with transmission and distribution operators would also be required, as well as all dealing with legacy equipment and integrated fossil fuels. This, coupled with new technology, new operation methods and a lack of public perception, could cause disruptions during the transition phase from hourly balancing. 

Market liquidity is also a genuine concern. The complexity of 15-minute balancing increases the risk of reduced liquidity in smaller markets, potentially resulting in fewer participants. 

Examples of 15-minute balancing in energy markets

The shift to 15-minute balancing and settlement periods is gaining traction in global energy markets, driven by the need for greater flexibility and grid efficiency. In the European Union, the implementation of the EU Clean Energy Package includes a coordinated rollout of 15-minute market settlement intervals, replacing traditional hourly models to improve real-time accuracy.

In Australia, the National Electricity Market (NEM) has already transitioned to a 15-minute settlement period in response to regulatory reforms aimed at enhancing market responsiveness and price signals.

Meanwhile, in the United States, regional transmission operators like CAISO (California Independent System Operator) and PJM are actively exploring sub-hourly settlement models, including 5-minute and 15-minute intervals, as part of a broader move toward more granular and dynamic electricity market operations.

Should your organisation prepare for 15-minute balancing? 

While the challenges that accompany 15-minute balancing may make it an inappropriate solution for some businesses, for others, it represents flexibility and financial opportunities.   

The impact on corporate power purchase agreements (PPAs) is positive - 15-minute balancing allows a precision that longer-periodic reporting can't give, allowing adjustments based on the volatility of the renewable energy market, reducing risk and pricing issues in the energy market.  Implementing more granular balancing also gives companies a strategic advantage by improving forecasting, automation, and overall market participation. 

15-minute balancing brings precision and flexibility but requires investment and planning. For many, it’s a strategic step toward smarter, renewable-ready grids.