The math of imbalance trading has changed, and what worked in 2022 is losing money in 2026. With platforms like PICASSO now operational, cross-border balancing has dampened some of the sharpest edges that characterized earlier years.
Nevertheless, imbalance value still exists; it is capturing it that has become more competitive. In this article, we explain why and how short-term renewable power traders can adapt.
Three compounding challenges
Imbalance value is compressing
Two to three years ago, imbalance value was often driven by visible extremes. Scarcity events, local shortages, or poorly coordinated activations of ancillary services could push prices to levels that made opportunities fairly obvious.
In that environment, large price spikes created room for reactive trading, and rule-based steering and baseline signals often worked (we return to this point later in this analysis). Missing a single moment was unpleasant, but rarely decisive for the outcome of an entire trading day.
As balancing markets have integrated and liquidity has increased, the most visible opportunities have faded. Margins are compressing across bidding zones, and arbitrage opportunities driven by extreme price spikes are becoming less frequent.
To illustrate, the chart below shows the rolling average day-ahead-to-imbalance spread across the Netherlands, Belgium, Germany, and France (12m on a weekly basis). The dashed line marks the introduction of PICASSO, the European platform for the cross-border exchange of automatic Frequency Restoration Reserves (aFRR). (We’ve covered its launch in the Netherlands and Belgium in separate articles.)
Several patterns stand out:
- After the introduction of PICASSO in the Netherlands and Belgium, imbalance spreads in both markets began to decrease.
- Belgium shows the most pronounced extremes, with the day-ahead imbalance spread falling by ~55%.
- The Netherlands experienced a more moderate ~20% decline from ~50 €/MWh to ~40 €/MWh.
- Germany’s spread reduction is likely driven indirectly as neighboring zones joined PICASSO.
- Interestingly, France followed a different path, with increasing spreads into mid-2025, driven by reduced nuclear availability and higher intraday volatility.
The data thus shows that imbalance value has become less event-driven and more structural. Traders who wait until compression is obvious in their market will be too late to adapt.
Renewable exposure is growing
Compressing margins means less room for error; for renewable portfolios, the sources of error are multiplying.
By design, renewable generation deviates from forecasts due to weather uncertainty. As renewable penetration increases, these deviations increasingly shape system-level imbalances and price formation.
A key reason is correlation. When weather conditions shift, forecast errors across portfolios tend to move in the same direction. Many participants end up long or short simultaneously. As a result, imbalance prices can adjust rapidly rather than gradually.
A recent example is the snowfall in the Netherlands at the beginning of January 2026. Solar production dropped sharply across the country as panels were covered simultaneously, leaving many portfolios short at the same time. The result was a system-wide imbalance in one direction.
The same logic applies in the opposite direction. On high-wind, high-solar days, curtailment decisions can cluster, triggering overcorrections that push the system back the other way within the same PTU. We previously covered the mechanics of market-impact in the Netherlands.
At the same time, renewable and hybrid portfolios introduce flexibility: curtailment, batteries, and demand response. That flexibility creates opportunity, but also exposure. The more actively a portfolio is steered, the more sensitive it becomes to timing and price expectations.
Thus, we identify two compounding challenges: lower value to capture and higher costs when things go wrong. The strategies most traders rely on are losing their edge in exactly this environment.
Baseline strategies no longer work
In more efficient markets, purely reactive or baseline-driven strategies are no longer sufficient to consistently outperform imbalance settlement.
TSO minute signals, for example, are inherently backward-looking. They describe the state of the system after imbalance volumes have materialized and after prices have already started to settle. Acting on them can mean locking in an imbalance position just as the market turns.
This is particularly visible in operational steering. Curtailment decisions based purely on realized prices can arrive too late to avoid unfavorable settlement. Batteries reacting to minute prices may start charging or discharging just as imbalance prices converge.
The chart below illustrates how a simple rule-based curtailment strategy performs across different years for the same solar asset in the Netherlands (strike price: –10 €/MWh). Our data shows a similar pattern for wind assets.
The trajectory is as follows:
- In 2022 and 2023, the strategy delivered steady, cumulative gains.
- In 2024, performance flattened. The same logic captured fewer profitable moments.
- By 2025, cumulative gains had largely disappeared.
The window that made these strategies profitable has closed. The question is what replaces them.
What traders can do
Anticipate imbalance prices rather than react to them
What’s missing in many trading setups is a forward-looking view on where imbalance prices are likely to settle. A proactive short-term trading and steering strategy depends on two factors:
The first is forecast accuracy. When price movements are smaller, relatively small errors in expected imbalance prices can separate a profitable position from a loss-making one.
This is a higher bar than it sounds: in a market driven by visible price spikes, directional accuracy was often good enough. In a compressed-margin environment, magnitude matters too. A forecast that correctly predicts a negative imbalance price but underestimates its depth by 30% may still produce the wrong curtailment decision.
The second is reaction speed. As prices form and settle faster, the ability to detect and act on imbalance conditions within the PTU increasingly determines whether value is captured at all.
Consider a battery that begins discharging in response to a minute signal, indicating a short system. If that signal is already two minutes old and the system has since flipped, the discharge locks in exactly the wrong position.
In practice, an imbalance price forecast can be used in two ways. When prices are expected to be favorable, the signal supports optimizing the imbalance position – deliberately adjusting volumes to benefit from the spread. When prices are expected to be unfavorable, it supports minimizing exposure by steering production closer to nomination before settlement.
How this is applied depends on the trading setup. Some participants consume the forecast directly as a signal for manual or semi-automated decisions. Others embed it into optimization models or automated strategies.
Use intraday markets as a risk management tool
Anticipation doesn’t apply only to imbalance positions; it shapes intraday strategy, too.
With less forgiving balancing markets, intraday continuous trading plays a larger role in risk management. In 2025, Europe’s intraday power market traded 241 TWh, up 38% in just two years, a volume that exceeds total imbalance volumes in most markets.
This growing liquidity creates room to adjust positions before delivery, reducing reliance on imbalance settlement. Especially in markets where imbalance steering is restricted or not allowed, intraday continuous becomes a relevant mechanism to reduce volumetric risk.
The implication is that allocating volume between intraday and imbalance markets increasingly depends on relative price expectations in both markets. Here, timing again matters. Anticipating that an imbalance price is likely to turn unfavorable an hour ahead enables intraday actions that reacting to realized imbalance prices cannot.
More broadly, tracking where the day-ahead-to-imbalance spreads start compressing and being ready to pivot to intraday strategies in time is strategically valuable in its own right. We track these signals across European markets in our newsletter – subscribe to stay ahead of the next shift.
Dexter’s Imbalance Price Forecast
At Dexter, we work daily with trading teams across Europe, and we’ve observed the shift from spikes to margins firsthand. We’ve designed our Imbalance Price Forecast to navigate this less forgiving environment, with a focus on PnL impact.
Our forecast provides near-real-time and intraday imbalance price forecasts, enabling operational decision-making across trading, dispatch, and asset optimization. It also serves as a directional proxy for intraday price dynamics, indicating how intraday prices are likely to evolve and where imbalance prices are expected to settle. The image below provides an example of the forecast in action:
Would you like to explore how your specific portfolio would perform using the Imbalance Price Forecast? Let’s talk.