PICASSO Project: Insights, Key Benefits & Future Challenges

In the face of increasingly volatile renewable generation, rising electrification, and a more interconnected grid, the European Union adopted the Electricity Balancing Guideline (EBGL) in December 2017. This regulation aims to harmonize and integrate electricity balancing across EU member states and lays the foundation for the implementation of European Balancing Platforms.    

Balancing platforms are real-time marketplaces where European TSOs procure balancing energy in a cost-efficient, transparent, and coordinated way. Electricity balancing is the continuous process of correcting deviations between forecasted and actual electricity generation and consumption. When demand exceeds generation, upward balancing energy is deployed; when generation exceeds demand, downward reserves are activated. Platforms act as virtual auctions, where market participants bid to provide balancing services. This improves liquidity, lowers costs and fosters cross-border cooperation by enabling TSOs to source the most competitive offers regardless of national boundaries. 

Four major EU-wide platforms have emerged under the EBGL: 

• FCR (for Frequency Containment Reserve): provides automatic response within 30 seconds from frequency deviations, pooling fast‐acting resources
• PICASSO (for aFRR, Automatic Frequency Restoration Reserve): enables automated balancing with a remote activation within 5 minutes of distributed resources
• MARI (for mFRR, Manual Frequency Restoration Reserve): covers reserves activated within 15 minutes to restore system balance
• TERRE (for RR, Replacement Reserve): facilitates the activation of longer lead-time reserves, typically within 30 minutes, to replace earlier balancing actions and maintain system reliability. 

Among the balancing platforms, PICASSO stands out as Europe’s first cross-border automated balancing platform.  It entered operation on June 1^st, 2022, enabling from day one the coordinated exchange of aFRR across multiple countries. 

PICASSO is powered by a central IT system operated by TransnetBW (a German TSO), which manages real-time optimization and settlement between participating TSOs. Each TSO connects securely to the platform and submits aggregated bids based on standard aFRR product definitions. Every four seconds, the platform runs a continuous activation cycle. While Balancing Service Providers (BSPs) submit their bids through national processes, TSOs forward aggregated information to PICASSO. The platform’s algorithm then selects the most cost-efficient combination of bids across countries. Once selected, activations are triggered via national systems and dispatched to the BSPs. By pooling automated reserves, PICASSO delivers major advantages: faster response times, increased market competition, more cost-effective operations, and a more efficient use of decentralized flexibility. For example, if the French TSO (RTE) detects a frequency drop and needs upward aFRR, it submits a balancing request on the PICASSO platform. At the same time, a German TSO (50Hertz) has BSPs with available upward aFRR capacity. PICASSO’s algorithm identifies these bids as the most cost-efficient to meet France’s needs and activates them. The German BSPs ramp up their output, and the resulting frequency correction supports system balance in France, while 50Hertz and RTE handle settlement and compensation through the platform. 

The end of 2024 and the first half of 2025 marked a major acceleration in PICASSO’s expansion, with a growing number of countries joining forces to exchange aFRR across borders. A key milestone came on April 2^nd, 2025 with the accession of RTE (French TSO), Europe’s largest TSO. As of mid-2025, 20 TSOs have joined PICASSO, from Finland to Spain. In total, at least 27 TSOs are expected to join the platform over time.  As more TSOs connect, particularly those bridging previously isolated regions, the benefits of full European integration are becoming clearer, pointing to greater efficiency and stronger grid stability. According to the latest ENTSO-E roadmap, Slovenia’s ELES is expected to connect in July 2026, followed by Portugal’s REN and Hungary’s MAVIR in Q3 2026. Then, next accessions are expected to take place in 2027 with Croatia’s HOPS in Q2, Romania’s Transelectrica in April and Sweden’s SVK in Q4 2027. Norway’s Stanett is expected to join in Q1 2028.  

Poland’s accession was particularly significant, as it bridged two previously isolated balancing zones in Eastern and Western Europe. This connection links Western and Central Europe with the Baltic region and Finland, increasing the volume of available bids and positively impacting price formation. Another milestone occurred in spring 2025, when all three Baltic TSOs (Lithuania’s Litgrid, Latvia’s AST, and Estonia’s Elering) joined PICASSO shortly after disconnecting from the Russian-controlled IPS/UPS grid. The Baltics began aFRR energy procurement on April 10, followed by capacity procurement on April 15, marking a symbolic and strategic move toward energy independence and regional security. 

In parallel, the integration of the Nordic region is progressing, albeit more gradually. TSOs in the Nordic bidding zones NO1–NO5 (Norway), DK1–DK2 (Denmark), SE1–SE4 (Sweden), and FI (Finland) require high-voltage direct current (HVDC) links for cross-border participation. So far, only Denmark’s Energinet and Finland’s Fingrid are connected to PICASSO. Denmark’s eastern region (DK2) is initially linked via the Storebælt cable, with plans to add further interconnections such as the COBRA cable (DK–Netherlands). Swedish and Norwegian TSOs are expected to join PICASSO by 2028. 

The PICASSO project has markedly improved operational efficiency across participating countries, with potential efficiency gains estimated at hundreds of millions of euros. But while it may indirectly support lower prices and greater use of renewables, its core mission is far more pragmatic: safeguarding real-time stability across Europe’s power grid, regardless of carbon intensity or price.  

However, concerns over potential price spikes and their impact on TSO engagement have prompted precautionary measures. To mitigate risks during the early years of the European balancing platforms, the Balancing Pricing Methodology was adopted by ACER³ on January 24^th, 2020, and later amended by ACER Decision 03/2022 in February 2022. This framework introduced transitional price caps: an upper limit of €15,000/MWh and a lower limit of -€15,000/MWh, in effect for the first four years of platform operation, until July 2026. These safeguards are designed to apply broadly across all bid types on the platform, including emergency situations; their aim is also to limit the exposure of BSPs to excessively high imbalance prices. Overall, these limits are designed to ensure a stable rollout as TSOs gradually join and adapt to the new cross-border balancing model. 

Despite these safeguards, PICASSO’s early years were not without challenges. In July 2023, Italy’s transmission system operator, Terna, joined the platform, only to witness sharp price spikes in cross-border imbalance settlements soon after. In February 2024, the balancing price reached nearly -9000 EUR/MWh, which was driven by two main factors: Italy had only partially offered its available volumes on the platform, and the border was uncongested. In March 2024, Terna suspended its participation in PICASSO, citing the unpredictability of imbalance prices and resulting financial losses, though it remained committed to the project. Terna returned as an operational member in November 2025 after mitigation measures were put in place to prevent similar incidents. 

In response to these price spikes, several mitigation measures were rolled out: 

• Volatility mitigation measure: to avoid short-term price peaks and ensure that bids that are selected by the AOF⁴ do not translate into local activation prices, the calculation of the Cross-Border Marginal Price (CBMP) has been revised. Instead of using a central CBMP, the price is now determined by the AOF based on local control targets per uncongested area and with the local merit order list⁵. Moreover, the volumes considered in the CBMP calculation are limited to the volumes actually selected by the AOF. This updated approach aims to better reflect local bid activation in the pricing mechanism. It also ensures that the specific dynamics of each LFC area are taken into account and prevents local BRPs from being exposed to high prices stemming from other TSOs’ merit order lists, as the TSO–BSP settlement price cannot exceed the local MOL price.
• Introduction of elastic demand. Since August 5, 2024, the platform has been equipped to manage this feature, which allows TSOs to price a segment of their demand and therefore establish a threshold beyond which they are unwilling to activate balancing energy. This helps prevent excessive imports or exports by a TSO when demand exceeds predefined power or price thresholds. Elia (Belgium), RTE (France), APG (Austria) and Energinet (Denmark) have already implemented elastic demand.
• Counter-activation: it occurs when the PICASSO algorithm activates bids in one direction (e.g., upward aFRR) in a TSO area despite that area having an imbalance in the opposite direction (meaning that bids are selected in both positive and negative direction in one individual uncongested area), because those bids are the most cost-effective option for overall system balancing. To solve this issue, the PICASSO algorithm was updated to take into account the price-based bid ranking : the bid with the lowest price in upward direction receives the lowest rank, similarly the bid with the highest price in the downward direction receives a rank with the lowest value. Then, the algorithm takes into account the rank for bid selection.  

These measures have bolstered confidence among TSOs, encouraging platform connections and reducing the risk of price spikes. The recent KPI report⁶ published in June 2025, covering July 2023 to December 2024, highlights three interesting indicators: 

• First, the evolution of requested and offered volumes over time shows no unexpected peaks or drops: the platform has operated steadily after each connection, with demand consistently well covered by available offers.
• Second, the total economic surplus⁷ amounts to 243.6 Mio EUR for July 2023 - December 2024. The report shows that price performance is strong, with only a small share of submitted bids approaching the transitional price limit (typically 4–8% exceed 95% of the limit, and even fewer go beyond 99%, indicating effective pricing and healthy competition). The economic surplus is higher for small LFC areas⁸, that get access to a much larger market via PICASSO. With further accessions to PICASSO, the economic surplus increases.
• Third, an analysis of the most expensive bids confirms that extreme prices are rare and stable, with the AOF algorithm mostly activating lower-priced offers. In an alternative simulation with no minimization of the activation volume, only an additional €1.21 million in surplus (+0.5%) would have been gained. This shows that the current optimization, which prioritizes minimal activation, has virtually no negative impact on overall surplus.  

The KPI report confirms that maintaining the current platform’s strategy is both technically and economically justified, which is an important milestone for the project. 

Accessions to PICASSO 

Under the EBGL and the PICASSO Implementation Framework, all TSOs from ACER member countries are required to join the PICASSO platform. The current roadmap envisions full participation from 28 TSOs by 2028. However, Swissgrid’s (Swiss TSO) accession remains in limbo. Despite being technically ready and being geographically particularly relevant due to its location at the very centre of the European grid, Swissgrid has been blocked from joining due to the absence of an electricity agreement between Switzerland and the EU. The Federal Council opened a consultation process on a Swiss-EU package, with a potential referendum expected in late 2027 or early 2028. The Electricity Agreement would guarantee equal market access for participants in both the EU and Swiss electricity markets and foster cross-border trade.  

Other TSOs involved in related balancing projects, such as MARI or IGCC, could also potentially join PICASSO, with Balkan operators like EMS (Serbia) and NOSBiH (Bosnia and Herzegovina) being key candidates. To the east, Ukraine is advancing toward integration by transposing core provisions of the Electricity Integration Package into national law. This legislative alignment is a prerequisite for joining the EU’s internal electricity market, including participation in single day-ahead and intraday market coupling as well as European balancing platforms like PICASSO. 

Relationship with the other Balancing projects 

Regarding the parallel European balancing platforms, two major developments are expected. 

The first one is a closer integration of the MARI and PICASSO projects in the coming years due to the launch of the Capacity Management Function (CMF), which went live in 2023. The CMF plays a crucial role in improving the quality and efficiency of the European balancing platforms by continuously calculating available capacities on individual balancing borders and providing these updated values to the AOF of each respective platform.  

Secondly, the TERRE project (Trans-European Replacement Reserves Exchange), which was launched in January 2020 to optimize the exchange and activation of Replacement Reserves (RR), is set to come to an end at the beginning of 2026. This decision stems from regulatory misalignments (current legal provisions conflict with the Electricity Balancing Guideline (EBGL) and the new Electricity Market Design Regulation (EMDR)) as well as upcoming changes to intraday gate-closure times. Specifically, the EMDR sets the Cross-Zonal Intraday Gate Closure Time to 30 minutes before the real time, a timeline that TERRE’s systems cannot accommodate since it is composed of a long Full Activation Time (FAT)⁹ of at least 30 minutes. This functional gap makes it impossible for the platform to comply with the revised market framework. Additionally, the planned introduction of a final RR process with 96 clearings per day would significantly reduce liquidity and result in a process very similar to that of MARI, thereby diminishing TERRE’s added value. As a result, while the end of TERRE may lead to increased activations on the MARI platform, it is not expected to have any impact on PICASSO. 

Market evolution 

The surge in renewable generation across Europe is another key challenge for the future of the PICASSO platform. Introducing greater supply variability and unpredictability, it leads to a significant uptick in the activation and exchange of aFRR on the PICASSO platform. As wind and solar outputs fluctuate, TSOs increasingly rely on PICASSO’s cross-border balancing to maintain system frequency, causing both the volume of traded balancing energy and the volatility of clearing prices on the platform to rise. In 2023, ACER reported a 10 % rise in hours dominated by “non‑responsive” generation (i.e. generation that cannot adapt to short-term fluctuations in demand, such as wind turbines or solar panels), a trend directly linked to more frequent price spikes and heavier use of balancing reserves. For example, after Denmark joined PICASSO, a 45 MW aFRR‑up activation in DK2 peaked at €2,100/MWh, while a 140 MW activation across DK1+DK2 on 12 February 2025 soared to €4,618/MWh during low‐wind periods. Over its first year, PICASSO recorded 235 high‑clearing‑price incidents (1.27 % of all quarter‑hours, as shown in the ENTSO‑E’s 2023 Market Report), highlighting how increased renewable variability drives both the volume of traded balancing energy and the volatility of clearing prices. 

To handle these challenges, PICASSO uses price signals to absorb renewable-driven imbalances, as prices tend to be more attractive when there is excess energy, whereas physical cross-border capacity constraints limit the amount of energy exchanged between TSOs. By 2030, each EU country must have established interconnections that allow at least 15% of the electricity produced on its territory to be transported across its borders. This will significantly strengthen PICASSO’s role:   

• Greater liquidity and price convergence: expanded interconnections will allow TSOs to access a broader European reserve pool, lowering costs, smoothing local scarcity spikes, and driving prices toward continental convergence.
• Enhanced market integration: during extreme imbalance events, TSOs will be able to source balancing energy from distant surplus regions, improving system resilience. 

Together, these developments will make PICASSO far more robust and economically efficient. 

With its scope, scale, and ambition, PICASSO is a pioneering project in electricity balancing. If it fulfils its promise, the platform has the potential to reshape balancing processes across territories shared by multiple TSOs, significantly impacting market integration. 

As other regions begin developing their own balancing platforms, they may look to PICASSO for insights, both in terms of its successes and the early challenges that have since been addressed. For example, the Southern African Power Pool (SAPP), a cooperation of TSOs from 12 countries under the Southern African Development Community (SADC), is currently developing a similar platform. SAPP has already established a common power grid and an electricity market across the region¹⁰. 

Meanwhile, the Gulf Cooperation Council Interconnection Authority is operating an energy market platform¹¹, and deeper cooperation in that region could eventually lead to more integrated initiatives, similar to those in Europe. Additionally, countries like Australia and Japan, which each have multiple TSOs into their national territory, are actively exploring how to make their electricity markets more fluid. A shared balancing platform could be one solution. ¹² 

PICASSO may therefore not only enhance Europe’s grid resilience but also serve as a global model for regional electricity integration. 

At Sia, we support key players in the energy sector and play an active role in European balancing projects. We bring strong expertise in project management and operational excellence, backed by a deep knowledge of network balancing and hands-on experience with complex, multi-stakeholder initiatives. 

Key takeaways 

• PICASSO is central to Europe's balancing strategy: PICASSO is Europe's first cross-border, automated platform for aFRR (automatic Frequency Restoration Reserves), allowing TSOs to share balancing energy in real time. It enables faster, more cost-effective, and decentralized grid balancing across borders, which is crucial as Europe shifts to renewable energy.
• Steady progress toward broader European coverage: 20 TSOs have joined PICASSO, including recent integrations like Poland, Spain, the Baltic states, and France. Further accessions are planned through 2028, notably in Southeast and Nordic Europe.
• Effective mitigation of price volatility: high-price mitigation measures such as elastic demand and revised CBMP calculation have stabilized operations and restored confidence.
• Strong economic and operational performance: A recent KPI report (published in June 2025) highlights €243.6 million in total surplus, steady bid volumes, and minimal reliance on high-priced offers.
• PICASSO as a global benchmark: the platform offers a blueprint for balancing market integration worldwide, with emerging initiatives already drawing inspiration from Europe’s experience.