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Welcome to the reserve market – additional earning opportunities for balancing the power system

The power system needs reserves to keep electricity production and consumption balanced every hour of the day and maintain a stable grid frequency. Fingrid hopes new players will join the electricity reserve markets – now, getting involved is easier than ever.

As much electricity must be produced as is consumed at any given moment. To maintain a state of balance in the grid, electricity producers and consumers plan their needs and offerings as accurately as possible in advance and trade on the electricity exchange.

If consumption proves higher than expected or, for example, wind power cannot produce the planned amount of energy, Fingrid keeps the electricity system balanced using the electricity reserves it buys. This final and essential fine-tuning of the power grid is done at the time of use.

“Reserves are also needed to manage disturbances if one of the large power plants or cross-border connections develops a fault,” says Pia Ruokolainen, Expert at Fingrid.

For example, consumption reserves can include industrial plants or large greenhouses.

Reserves are also needed when there is too much electricity in the system and the excess electricity must be removed. This is called down-regulation, and it means reducing production or increasing consumption. This can happen if, for example, a transmission connection exporting electricity from Finland fails.

“A reserve is a controllable power plant, consumption facility or grid energy storage facility capable of increasing or decreasing its output according to the power system’s needs. For example, consumption reserves can include industrial plants or large greenhouses,” says Ruokolainen.

More reserves are needed all the time

Currently, approximately 70 companies participate in the reserve markets. Hydroelectric power has traditionally participated in the reserve markets, and there is still a lot of it. In addition, there are different types of electricity users, different sizes of grid energy storage facilities and other forms of production.

Although the reserve market has become busier in recent years, more reserve units are needed as the energy transition and, in particular, the growth of wind power demands more and more flexibility in the power system.

“In the past, the power system was more even. Production did not vary according to the weather, and consumption was more predictable,” says Jukka Kakkonen, Expert at Fingrid.

He says that the reserve market would welcome more wind power, consumption, batteries and solar power primarily, but that, naturally, all other types of reserves would also be good.

Reserve products with different requirements

As the balancing capacity of reserves is used for different needs and in different situations, different reserve market products are needed.

“Some products are intended to rectify disturbances, while others are used to continuously balance the grid. The fastest product has a response time of about 1 second, and the slowest is 15 minutes,” says Ruokolainen.

Reserve products are procured in their own marketplaces, and participation is a question of the producer’s or consumer’s own resources.

In total, there are five reserve products: the Fast Frequency Reserve (FFR), the Frequency Containment Reserve for Disturbances (FCR-D up- and down-regulation products separately), the Frequency Containment Reserve for Normal Operation (FCR-N), the automatic Frequency Restoration Reserve (aFRR), and balancing power and balancing capacity (mFRR reserves).

Each reserve product has its own set of rules and technical requirements, including the speed of power change.

“Different asset types fit into different reserves. For example, a battery can provide power very quickly, but it also runs out quickly. On the other hand, a hydroelectric power plant adjusts more slowly but can be kept active for a long time,” says Kakkonen.

The need for certain reserve products is increasing due to the energy transition. In other words, more resources are needed to balance the grid.

“The increase in wind and solar power reduces the power system’s natural ability to resist frequency changes, increasing the need for the fast frequency reserve in the future. In addition, it is foreseeable that more aFRR and mFRR reserves will need to be allocated to manage the power balance,” says Ruokolainen.

The need for these reserves will also depend on how well electricity market operators can balance their production and consumption in the future.

Welcome to the reserve markets!

Fingrid has improved the technical system for the reserve markets, making it compatible with all types of technologies. Fingrid has also reduced the minimum bid size for balancing bids from five megawatts to one, enabling smaller suppliers to join.

“If a plant or company has controllable production or consumption in the megawatt category, it could be a suitable candidate for the reserve market,” summarises Kakkonen.

Anyone wishing to become a balancing service provider can contact Fingrid’s experts, who will assess the unit’s suitability for various reserve markets. The facility’s reserve capability must be built and verified before joining or participating in the reserve markets.

Many reserve units can participate in several reserve markets.

Kakkonen recommends that if a company is able to maintain several types of reserves, it is worth acquiring the readiness to provide several products.

“On any given day, one reserve type could be worth more than another, so it is always good to produce the reserve that delivers the best return that day. Many reserve units can participate in several reserve markets,” says Kakkonen.

“In general, all new production plants should be designed for flexibility, as flexibility is needed in the electricity markets.”

Read more about reserve markets.

Reserve products

can be activated within a few seconds and prevents the frequency of the power system from falling too far in the event of a disturbance

can be activated within a few seconds and prevents the frequency of the power system from falling too far in the event of a disturbance

continuously takes care of minor changes in the system’s balance

continuously takes care of minor changes in the system’s balance based on a signal from Fingrid

continuously takes care of minor changes in the system’s balance

Wind power is a rapidly adjustable reserve

Fingrid has been running a pilot project called Wind Power for the Reserve Markets over the past year to study the potential for wind power to provide flexibility in the balancing market. The project will continue until June this year.

In order to implement the energy transition while ensuring the reliability of the power system in a cost-effective way, all forms of flexibility, including wind power, are needed,” explains Niko Korhonen, Specialist at Fingrid.

The companies involved in Fingrid’s wind pilot project built their wind farms in spring 2023 and worked with Fingrid to resolve the technical challenges related to the reserve markets, such as how to carry out the reserve market approval processes, conduct tests, handle disruptions and trade with entities abroad.

Centrica Energy in Denmark is one of three wind power companies involved in Fingrid’s wind power pilot project alongside Prime Capital AG of Germany and Enefit Green of Estonia.

“Thanks to Fingrid’s wind pilot project, we have the capability to provide reserves from renewable energy sources. The pilot project will help us open up new commercial opportunities that will ultimately benefit energy consumers and society at large,” says Manager, Head of Physical Asset Trading Thorsten Schuch from Centrica Energy.

He emphasises that when wind power, or any other form of renewable electricity production, participates in relevant energy and capacity markets, it creates significant commercial opportunities and increases investors’ desire to invest in renewable production.

Centrica Energy’s primary focus is on its automatic Frequency Restoration Reserve (aFRR) and Frequency Containment Reserve for Disturbances (FCR-D) products. However, the wind power pilot project also inspired it to begin the commercial supply of products in the balancing power and balancing capacity markets (mFRR).

The pilot proved, pleasingly for Fingrid, that wind power is a rapidly adjustable reserve. According to Korhonen, the Fast Frequency Reserve (FFR) requires further development, as the technical requirements proved challenging: based on the experiences gained during the pilot project, it will be necessary to assess whether the requirements could be adjusted to make them more suitable for wind power.

Over the Christmas period, Fingrid issued guidelines for wind and solar power operators on how to join the reserve markets.


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