The term Balancing Area refers to an area in a grid system over which supply and demand must be balanced at all time. It’s important to note that this doesn’t mean all that supply (i.e. power plants) and demand (end-use) must be physically in the balancing area, since imports or exports of electricity through interconnectors (to other balancing areas) provide another mechanism of achieving balance.
Larger balancing areas tend to have the advantage of smoothing variability in both supply and demand. This can be an important issue for renewable power sources for example: variability of supply can be large in a small geographic region (e.g. when the sun goes behind cloud or the wind drops) but is likely to be less over a larger area (on a country scale, it may be cloudy/still in one place but is likely to be sunny/windy elsewhere, if you go far enough away).