2022-10-25
Baltic balancing capacity market: an opportunity for investments in batteries and renewable energy solutions
Lithuanian electricity transmission system operator Litgrid, together with Latvian and Estonian operators Augstsprieguma tikls (AST) and Elering, have calculated that from 2025, when the Baltic balancing capacity market will start operating, the demand for balancing capacity will reach up to 1512 MW. The new market is being created in preparation for synchronisation with continental Europe, after which the Baltic countries will become one frequency control block and order balancing capacity services together.
Balancing capacity is required for the system operators to ensure that the electricity production is constantly in line with the consumption. According to Donatas Matelionis, Director of Power System Operations Department at Litgrid, the efficient operation of this market requires private business investment in battery systems and solar and wind farm production management solutions.
The market creation process provides a period for businesses to prepare for the change and take advantage of the opportunities it creates: two years to invest and build facilities, the services of which will later be purchased to ensure the stable operation of the electricity systems of the three countries.
The Baltic operators Litgrid, AST and Elering have submitted the balancing capacity market rules for the public consultation, which envisage how this market, which will replace the current reserve model, will work.
"From 2025 the operators will buy the balancing capacity in a joint auction every day. The technical capabilities will be required to both increase and decrease electricity generation or consumption. Battery systems that can both use energy and supply it to the grid when needed are perfect for this. Renewable resource power plants located and being developed in Lithuania and other Baltic countries could also participate in the balancing market by temporarily reducing production when there is a surplus," says D. Matelionis.
According to him, as the Baltic countries plan to operate synchronously with the Continental European Synchronous Area, there comes a great need for the balancing solutions, which can be partially ensured by must-run thermal power plants, but this continuous electricity production would significantly increase the costs of the service.
"The investments in new solutions - battery systems, demand side response services or management systems for the renewable energy resources - can ensure balancing capacity for rapid integration of the renewable resources and reduce transmission operators' costs for purchasing the balancing services. All this will contribute to a lower final price of electricity for consumers. At the same time, it is an investment opportunity for the companies", says the head of the Power System Operations Department.
Balancing capacity services in the common market of the Baltic countries will be purchased daily in the auction, in 15-minute periods day-ahead. Starting from 2025, the automatic and manual frequency restoration reserve services (aFRR and mFRR) will be purchased in the market, and after the synchronisation with the continental Europe the frequency containment reserve (FCR) service will be purchased. These reserves differ in their response speed and duration - FCR must be activated within 30 seconds, the aFRR within 5 minutes, and mFRR within 15 minutes.
Litgrid, AST and Elering have made calculations of what the demand for these services will be. The total required amount of the balancing capacity in 2025 will reach up to 1512 MW, part of which will be ensured by the operators' own capacities – energy storage systems and reserve power plants. But about 80 percent of this need will be bought in the market. After the synchronisation, the need for a 25 MW of FCR capacity will contribute to this amount.
"Increasing of the balancing capacities is relevant already, but it is also important to note that their need in the Baltic countries will only grow. The breakthrough of the renewable energy means that we will have more and more unstable electricity production in the market, the deviations of which will have to be balanced by the operators. For example, according to the Baltic operators' calculations, between 2025 and 2031 the need for the aFRR will grow from 134 MW to 193 MW, and for mFRR - from 677 MW to 1112 MW," says D. Matelionis.
The public consultation on the Baltic balancing capacity market rules will take place until November 20th. In the cource of the consultation, market participants can ask questions and submit their comments. The rules will then have to be approved by the energy regulators in all the three countries.
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