All technical, market and regulatory preparations are in place for Hungary to join European automatic and manual frequency restoration reserve platforms Picasso and Mari on 1 October, transmission system operator (TSO) Mavir said on Friday.
Integrating Hungary into Picasso and Mari is unlikely to affect wholesale electricity prices directly, market participants told Argus. But it could affect the volatility of imbalance prices and revenue for Hungarian battery energy storage system (Bess) operators.
The cost of imbalance reflects the cost of matching power generation and demand in real time. Imbalance costs are incurred by producers and consumers when their demand or production is unexpectedly lower or higher than scheduled. Currently, Hungarian imbalance prices are set by bids from domestic balancing market participants only.
TSOs participating in regional balancing systems input bids from their market and an algorithm activates balancing capacity — upward and downward revisions in demand and generation. The aim is to balance the system most efficiently across all markets, taking into account transmission capacity constraints.
In the case of Picasso, the algorithm determines the cross-border marginal price (CBMP) every four seconds, which TSOs use to derive the 15-minute imbalance settlement costs they charge to users.
Since neighbouring Slovenia joined Picasso in July, "imbalance prices are becoming quite hard to predict", market participants told Argus. The Slovenian imbalance settlement price exceeded €13,000/MWh during a region-wide heatwave on 7 July, according to market operator Borzen. In this case, a single settlement period could "pose a material financial threat" to smaller producers, especially "unstable" weather-dependent renewables.
But TSOs have different methodologies to derive the imbalance settlement prices from the CBMP. Mavir has opted for a volume-weighted average rather than marginal pricing, to avoid a "four-second spike" setting the 15-minute settlement, market participants told Argus.
Opening the balancing market to competition
Hungary's entry into Picasso could expose the country's Bess operators to greater competition for balancing market revenue.
Hungarian batteries will have to bid against Slovak Bess, which can bid lower as they pay lower grid fees, market participants told Argus.
But potentially lower revenue from the balancing market after joining Picasso is unlikely to threaten Bess buildout. Developers are aware that the market will inevitably become saturated as more and more batteries come on line, market participants told Argus.
Hungary has one of the most volatile intraday markets in the EU, making it an attractive market for Bess, which can profit from intra-day arbitrages.
Hungary had 984MW of Bess capacity installed at the beginning of September, up from just 146MW at the end of last year.
Operational Picasso members include most of western and central Europe including neighbouring Slovenia, Austria and Slovakia. Romania and Croatia are set to join in the second quarter of 2027, according to the latest Picasso ascension roadmap, published in February.
