Reserve markets

A Balancing Service Provider is compensated based on the trades, provided that the reserve has been maintained and activated according to the requirements. Reserve resources with the lowest maintenance costs receive the highest returns because the highest accepted bid determines the market price for all trades of that reserve product during the market period (marginal pricing principle). More information on pricing is provided below in the Procurement and pricing section.

For companies, operating in the reserve markets can be either a primary business or a supplementary activity. In practice, reserves can also be produced by entities whose regulation capability is offered to the reserve markets within the limits of their available regulation capacity for their primary use, such as industrial plants or other consumption sites, as well as energy storage systems. So-called aggregated entities, consisting of multiple smaller sites, can also participate in the reserve markets.

Reserve markets can also generate indirect income by providing services to other companies. Operating in the reserve markets requires not only an controllable unit but also the verification of technical requirements, the establishment of communication connections, as well as trading, billing, and control room operations. Reserve providers do not necessarily need to handle these aspects themselves if they choose not to but can instead utilize service provider companies. See the list of service providers operating in the reserve markets: Reserve Suppliers and Service Providers.

Historical market data for the reserve markets (such as procurement data and prices) is available from several sources:

• Fingrid's Reserve Market Information
• Fingrid's Open Data Service
• ENTSO-E Transparency Platform
• Nordic Unavailability Collection System (NUCS)

With the reserve income calculator, it is possible to estimate the value of one megawatt of reserve capacity in the reserve markets over a selected period based on historical prices.

Fingrid procures the necessary amount of reserves to ensure the stable operation of the electricity system for every hour of the year. This reserve obligation is primarily fulfilled through market-based means, meaning that reserves are mainly purchased from reserve providers. Additionally, Fingrid can procure available reserves from both Nordic and European reserve markets.

The reserve procurement costs are covered by the grid service fees and balance service fees charged to Fingrid's transmission network customers and balance responsible parties, which ultimately also affect the fees charged to electricity users. Thus, competition in the reserve markets enables cost-effective procurement of reserves which benefits the entire Finnish society.

Reserves are procured from capacity markets and energy markets. In capacity markets, trading involves reserve capacity, i.e., the reservation of regulation capability for the needs of the power system. Compensation in capacity markets is therefore based on maintaining regulation capability available, meaning that compensation is paid for being ready to regulate the power. In energy markets, compensation is paid for activated energy, i.e., for actually changing the power. Through energy markets, aFRR and mFRR bids are activated in price order from the cheapest to the required amount at any given time.

Marginal pricing is used in all reserve markets. This means that bids are accepted from the cheapest bid until the procurement need is met. The highest accepted bid determines the market price for all trades of the respective reserve product during the market period. The market period refers to the trading period of the reserve markets and varies by reserve product.

An exception to this is the regulation activated at a higher price than the marginal price from the aFRR energy market due to regulation delays, and the special regulation activated from the mFRR energy bid list for the needs of the transmission system operator, where compensation is based on actual bid prices (pay-as-bid).

* Pay-as-bid pricing is used in aFRR energy market for regulation acitvated at a higher cost than the marginal price due to regulation delaysand in mFRR for special regulation activated due to transmission system operator needs.

The table below details the time limits for capacity and energy markets. GCT (Gate Closure Time) refers to the deadline for submitting, modifying, and deleting bids. GOT (Gate Opening Time) refers to the earliest time for submitting bids.

In normal circumstances, Fingrid confirms the capacity trades for the next day and sends the results to the market participants at the following times at the latest:

In mFRR and aFRR energy markets, activations are ordered when needed and market participants are immediately informed about the trades.

The reserve markets operate with annual, hourly, and quarter-hour markets.

All reserve capacity is traded in hourly markets. In hourly markets, the participant submits capacity bids for the hours of the following day, and each hour is assigned its own price. Fingrid pays the participant a capacity fee for the resulting capacity trades.

aFRR and mFRR energy markets operate at the quarter-hour / 15 min level. In the aFRR energy market, however, the Bid Validity Period (15 min) and the Market Time Unit (4 s) differ from each other. The necessary amount of aFRR energy bids are activated from the bid list in price order at 4-second intervals within the market time period. The bids are always selected from within the validity period (15 min). Therefore, the Balance Service Provider submits aFRR energy bids in 15 minute periods, but the amount of procured aFRR energy and the market price are determined at 4-second intervals.

In addition to the hourly market, the FCR reserves use also an annual market. Fingrid organizes a public competition in the autumn for the following year's FCR annual procurement. The capacities accepted in the competition are paid the price for maintaining the annual market capacity according to the competition and the corresponding procurement during the next calendar year. Unlike the hourly market, the annual market capacity is always procured when the reserve provider can maintain it. Participation in the annual market does not obligate the reserve provider to maintain the capacity, but the annual market capacity cannot be offered in the hourly market. The reserve provider informs Fingrid the previous day of the annual market capacities maintained for the following day's hours. Annual market capacity is reported using EDI messages* (*to be replaced by ECP messages during 2025). You can view the realized annual market prices and quantities on Fingrid's Open Data service (FCR).

Reserve markets utilize two market management systems: Vaksi and Fifty NMMS. Vaksi is a market management system operated by Fingrid and is used for FCR and FFR hourly markets as well as mFRR and aFRR energy markets. NMMS is a Nordic platform developed by Fifty and is used for mFRR and aFRR capacity markets. Finnish reserve market participants submit mFRR and aFRR capacity bids to the NMMS platform, except in exceptional situations* where capacity bids are also entered through Vaksi. The division of reserve products onto these two systems is shown in the table below.

Fingrid grants access to both platforms to reserve providers and their service providers when needed. Through the market management systems, participants can submit and modify their bids and view their trades. However, the submission of bids and the receipt of trade data is primarily handled through ECP/EDX messages. Further information on bid and trade messages, as well as market platforms, can be found on the Reserve Trading and Information Exchange page. The page also includes the Reserve Trading and Information Exchange guide, which describes the use of the trading platforms and implementation instructions detailing the message-based submission of bids and receipt of trades.

Fingrid operates in the reserve markets in two different roles; both as a buyer of reserves and as a maintainer of the reserve markets. In addition to procuring reserves from the reserve markets, Fingrid develops the reserve markets and the technical requirements of the reserves to meet the needs of the power system now and in the future. The development of the reserve markets is guided by the power system security, legislation and international cooperation, as well as the principles of cost-effectiveness, market-based solutions, technological neutrality, and transparency.

The Energy Authority acts as the national supervisory authority for wholesale electricity markets, including the reserve markets. The Energy Authority ensures that the reserve markets operate in compliance with energy legislation. In practice, changes to the terms and requirements of the reserve markets and products require the approval of the Energy Authority. Read more on the Energy Authority's website.

A reserve provider (a Balancing Service Provider, a BSP) is a participant in the reserve markets who offers reserves to the reserve markets for Fingrid to procure and use for balancing the power system. In other words, reserve providers offer balancing services to transmission system operators, in the case of mainland Finland, to Fingrid.

To act as a reserve provider, a company must have a valid reserve market agreement with Fingrid. The requirements for reserve providers are listed in Appendix 1 Terms and Conditions of the product-specific (FFR, FCR, aFRR, and mFRR) reserve agreement.

A reserve agreement is a formal agreement between Fingrid and the reserve provider, the terms of which are public and equal. To sign the agreement, Fingrid requires the reserve provider to demonstrate its reserve unit’s/entity’s capability to operate in the reserve markets, for example, by conducting prequalification tests and establishing and testing the necessary communication connections. Fingrid does not charge a fee for signing a reserve agreement. Reserve agreements are valid indefinitely.

Every participant in the electricity markets must continuously manage its electricity balance, meaning the balance between the production, procurement, consumption, and sale of electricity. In practice, a participant is unable to do this perfectly, as forecasts always carry some error. Since imbalances must be corrected, the electricity market participant must have an open supplier who balances the participant's electricity balance.

A balance responsible party (BRP) refers to a participant in the electricity market who is responsible for the imbalances of the parties within its balance and has a valid balancing service agreement with Fingrid. In other words, a balance responsible party is a participant whose electricity balance Fingrid balances, meaning its open supplier is Fingrid. The imbalances of balance responsible parties are corrected in the national balancing settlement, which Fingrid is responsible for.

Since operating in the reserve markets causes imbalances in the market participant's electricity balance due to the activation of reserves, the reserve provider must make an agreement with eSett if the reserve provider operates in the FCR-N, aFRR, or mFRR markets. If the reserve provider already has the role of a balance responsible party, a new, separate agreement with eSett is not necessary.

Service providers are companies that offer services to businesses operating in the reserve markets, such as verifying technical requirements, establishing communication connections, and related to trading, billing, and control room operations. A reserve provider can utilize service provider(s) freely as they see fit. See a list of service providers operating in the reserve markets: Reserve providers and service providers.

To offer reserves in the reserve markets, one important requirement is a minimum bid size, which depending on the reserve market is either 0.1 MW or 1 MW. Smaller individual controllable resources can be aggregated into a larger entity, also known as an aggregated entity. The reserve provider can, for example, aggregate the small units they manage into a larger entity or use a separate service provider for this purpose. It is also possible that a small, individual unit from a third party is integrated into the portfolio of an existing aggregator or service provider that consists of reserve units from several different companies.

Since activating reserves causes balance deviations, most reserve markets require information on the balance responsible party for each reserve unit for energy corrections. This information may also be required for energy payment, which denote to the compensation for the energy required by reserve activations. There may be differences between reserve products in this regard.

Aggregating units from the same balance responsible party’s balance is possible in all reserve markets. Due to the handling of the imbalances, there may be restrictions on aggregating units under different balance responsibilities in some reserve markets.

Participating in the reserve markets requires information exchange between Fingrid and the reserve provider. This information exchange is used for market operations, reporting, balance settlements, and billing. Generally, there are two types of information exchange in the reserve markets: real-time information exchange and market information exchange.

Real-time information exchange is, as the name suggests, the exchange of information in real-time. In practice, depending on the reserve and the exchanged information, this means data updated every 4 to 60 seconds. Real-time data is used as the basis for billing in aFRR, FCR, and FFR products. The most common real-time data exchanged is the measurement of active power and the maintained and activated reserve amounts. Based on this information Fingrid can also apply possible sanctions.

The Reserve Trading and Information Exchange Guide and a signal list containing a detailed breakdown of reserve product-specific real-time signals are available on the Reserve Trading and Information Exchange page. The signal list also specifies reserve-specific historical data, which Fingrid and the reserve provider can use to verify reserve activations and conduct post-review billing.

Legislation and regulations

• EU legislation: EBGL and SOGL
• Nordic electricity system usage agreement: Nordic SOA
• Electricity Market Act: Electricity Market Act (497/2023)
• Market surveillance: REMIT

Market surveillance

The Energy Authority acts as the national regulatory authority for wholesale electricity markets in Finland, ensuring that electricity markets, including reserve markets, operate in accordance with energy legislation.

Fingrid’s market surveillance aims to ensure the reliability and transparency of the reserve markets maintained by Fingrid. Market reliability is beneficial for all market participants. Market surveillance works to detect suspicious situations in the markets and reports any potential misconduct to the regulatory authority.

Market surveillance ensures that market participants comply with the REMIT regulation issued by the European Parliament. The regulation prohibits market manipulation and insider trading. It also requires market participants to publish insider information related to electricity markets. Additionally, the regulation obliges Fingrid to maintain a market surveillance function that detects and reports potential misconduct to the regulatory authority.

Fingrid utilizes the market surveillance department of Nord Pool Group as an external service provider for market surveillance implementation. While conducting surveillance activities, Nord Pool Group’s market surveillance department may directly contact reserve market participants to request additional information about the bids submitted to the market. The responsibility for implementing market surveillance, despite outsourcing, remains with Fingrid.

Fingrid’s market surveillance collaborates with the Energy Authority and the Agency for the Cooperation of Energy Regulators (ACER).

Further information:

• If you have any questions regarding Fingrid’s market surveillance, you can contact us via email at market.surveillance(at)fingrid.fi.
• Read more about market surveillance on the Energy Authority's website under Market supervision.
• Regulation (EU) No 1227/2011 (also known as the REMIT regulation)
• Regulation (EU) No 2024/1106 amending the REMIT regulation (also known as REMIT 2.0 regulation)