One of the important tasks of a transmission system operator is to keep the generation and consumption of electricity in balance at all times. Until now, the transmission system operators in Sweden and Norway – known as Svenska kraftnät and Statnett respectively – have handled the balancing of the Nordic synchronisation area, which encompasses Finland, Sweden, Norway and Eastern Denmark, with the help of balancing power markets.
The Nordic Balancing Model will alter the way the region’s power system is balanced. The need for this development stems from the energy revolution and the European legislation underpinning it. Weather-dependent electricity generation has made balancing harder than ever, and electricity markets need to modernise to respond to the energy revolution.
“Under the new balancing model, balancing will be handled in various bidding areas. Finland constitutes a single bidding area and, in the future, we will handle balancing in our country’s bidding area ourselves in relation to the Nordic bidding areas,” says Executive Vice President Asta Sihvonen-Punkka.
The new balancing model is known as the Area Control Error (ACE) model. There are a total of 11 bidding areas in the Nordic synchronisation area.
Response to the energy revolution
The first significant change to become tangible to stakeholders concerns balance responsible parties during the transition from various generation and consumption balancing and corresponding pricing systems to a single pricing model. The balance responsible parties are responsible for balancing out their customers’ power balances – electricity generation, purchasing, consumption and sale.
The single pricing model will be introduced in the Nordic countries in November 2021.
The 15-minute imbalance settlement period requires a change in mindset
The largest change for stakeholders is the switch to 15-minute imbalance settlement period. The 15-minute imbalance settlement period guides market parties to support the power system in 15-minute periods, thereby helping transmission system operators to keep the power system in balance. The 15-minute imbalance settlement period will affect every market party: distribution system operators, balance responsible parties, retailers, generators and consumers, as well as every party involved in energy metering.
ICT suppliers are also among the key stakeholders, as the Nordic Balancing Model is, above all, a massive ICT project.
Program Lead Maria Joki-Pesola says that the Nordic Balancing Model will change the operating principles of electricity markets:
“As we head towards real-time markets, market parties are also altering their behaviour and optimising their operations in new ways. The transition from the one-hour system to a 15-minute one will require processes to be automated, as the market is no longer able to analyse or engage in trades in the one-hour world. It is likely that the intraday market volume will increase because it is possible to trade there close to the real time. This has happened in Central Europe, among other areas, where imbalance settlement period and intraday market already operate with 15-minute periods. The changes will present new opportunities, and we may gain new types of operators in the electricity market.”
According to European legislation, transmission system operators must keep the sector informed of the transition to a 15-minute imbalance settlement period and ensure that there are no delays to the schedule. In order to share information and accelerate change, Fingrid set up a reference group, which market parties are comprehensively represented. The other Nordic countries have followed suit.
At present, Fingrid is waiting for the authorities to respond to its request to postpone the go-live date of the 15-minute imbalance settlement period until spring 2023. Similar requests have been submitted in the other Nordic countries.
Reserve markets in transformation
The Nordic Balancing Model involves building common Nordic reserve markets for the frequency restoration reserves needed for balancing; both automatic and manual reserves. Nordic marketplaces enable less expensive resources to be used as reserves. Although every transmission system operator defines the balancing power it requires in its own area, the reserves used for balancing can be activated optimally via common markets.
The expansion of reserve markets into a European entity will create new opportunities for reserve trading.
“The guideline for electricity balancing sets the constraints for reserve markets. In the future, orders and trading related to frequency restoration reserves will be made for specific bidding areas in European marketplaces. This will also require entirely new operating models, and each transmission system operator will take responsibility for its own bidding areas,” says Asta Sihvonen-Punkka.
As Finland transitions to the new balancing model, there will be a greater need for automatic frequency restoration reserves.