Changes to the balancing capacity market

The balancing capacity market of manual Frequency Restoration Reserve (mFRR) is going to change at the end of 2022 from a weekly procurement to an hourly market. Procurement volumes of up-regulation capacity will increase and the procurement of down-regulation capacity will start from the beginning of 2023. In addition, a common Nordic market for mFRR capacity is planned.

Fingrid procures balancing capacity from the balancing capacity market to ensure that there is enough Frequency Restoration Reserves to maintain the power balance between production and consumption and to ensure the reliability of the transmission network. Changes to market design of balancing capacity market are made to make participation to the market easier while the procurement needs are increasing.

Development of the procurement model

Fingrid has submitted the updated terms and conditions regarding the balancing capacity market for approval to the Energy Authority. Fingrid proposes that the current market for weekly capacity will become the hourly market that is run on previous day's morning. The new procurement model is planned to have go-live by the end of 2022.

1 MW minimum bid size

Fingrid has also proposed to reduce the minimum bid size of the balancing capacity market from five megawatts to one megawatt. The change in the terms and conditions is still awaiting approval from the Energy Authority, and it will be implemented one month after the approval, i.e. already before the renewal of the market design. In this context, the minimum bid size for the balancing energy market (mFRR energy activation market) remains unchanged, i.e. the reserve provider may submit one up and one down regulation bid of less than five megawatts if the reserve provider has an electronic bid activation in use and the minimum control capacity (5 MW) is not met.

Increasing procurement of up-regulation balancing capacity foreseen

With the commissioning of the Olkiluoto 3 nuclear power plant, the procurement volumes of up-regulation balancing capacity will increase, and the procurment of the balancing capacity market will be year-round instead of the current spring-autumn procurement. The first procurement in the balancing capacity market in 2022 was made in week 18.

Information about procurement can be found here: https://www.fingrid.fi/en/electricity-market/electricity-market-information/reserve-market-information/balancing-capacity-market-actual-procurement/

An updated estimate of the need to procure the balancing capacity for 2022 can be found here: https://www.fingrid.fi/en/electricity-market/electricity-market-information/reserve-market-information/balancing-capacity-market-estimate-of-required-procurement/

The procurement of down-regulation capacity will start at the beginning of 2023

Until now, Fingrid has procured only up-regulation capacity from the balancing capacity market. Capacity for down-regulation has not been procured separately, but the need has been covered by voluntary domestic and Nordic down-regulation balancing energy bids. However, with the energy transformation and the new Nordic balance management principles, the procurement of down-regulation capacity will also become topical in order to ensure the adequacy of balancing capacity. Fingrid has decided to start the procurement of balancing capacity from the balancing capacity market at the beginning of 2023 or at the latest when the market design change from weekly to hourly procurement is in use. Procured volumes will be increased gradually.

Nordic mFRR capacity market under development

The Nordic transmission system operators are implementing the joint Nordic mFRR capacity market as part of the Nordic Balancing Model Project. The common market aims to improve the cost-effectiveness of procurement. Cross-border trading of mFRR capacity requires a reserve of transmission capacity. The go-live of the common market will take place at the end of 2023 at the earliest.

More information:

Laura Ihamäki, Fingrid, tel. +358 30 395 5166

Email addresses are in the format firstname.lastname@fingrid.fi