Baltic States launch 'unique' frequency reserve market

The Baltic frequency reserve market was launched for the first time on Tuesday as desynchronization from the Russian electricity grid approaches. The system is "unique" in Europe, Elering said.
Over the weekend, Estonia's electricity grid will be disconnected from the Russian power system (BRELL) and synchronized with the Continental European network.
Until now, Estonia's frequency has been maintained by Russia. In future, the Estonian electricity system must manage independently.
With the launching of the frequency market by Litgrid (Lithuania), Augstsprieguma tīkls (Latvia) and Elering (Estonia) electricity producers can submit bids every morning for the following day, indicating how much energy they are willing to hold in reserve.
On Tuesday, electricity producers across the Baltics were able to submit their first bids for the next day, "Aktuaalne kaamera" reported.
"We have a sufficient number of bidders, with a comfortable surplus beyond our expectations. This ensures that from the weekend onward, we must independently maintain a sufficient amount of fast regulation capacity within the Baltics, and this reserve market guarantees that we can keep the electricity system balanced at all times," said Kalle Kilk, chairman of the board of electricity and gas system operator Elering.
The initial price for the frequency reserve will be determined on Thursday. Kilk estimated the total annual cost of reserves could be around €60 million, with Elering covering part of the cost until July.

However, the costs will eventually be paid by consumers.
"The price is about 0.5 cents per kilowatt-hour, which means approximately €1 per month for a household consumer. This is the price that ensures our energy security and supply reliability," said Karin Maria Lehtmets, head of energy markets at the Ministry of Climate.
Estonian energy company Eesti Energia will become the largest provider of both manual and automatic frequency restoration in Estonia.
"Everyone knows that Ida-Viru County has quite a few different production facilities, and we have various wind and solar power generation units distributed across the Baltics. Additionally, Estonia's largest battery storage system, with a capacity of 26 megawatts, started operating on Tuesday and will now assist Elering," said Kristjan Kuhi, a board member of Eesti Energia.
The minimum capacity that can be offered in the reserve market is one megawatt.
Renewable energy provider Sunly will provide reserves using its Pikkori battery storage system, which has a capacity of 1.7 megawatts.
"The Pikkori battery project is still a pilot project for us, and its capacity is not yet significant in this context. However, in the coming months, we aim to quadruple our storage capacity, and beyond that, we have even bigger plans," said Klaus Pilar, head of Sunly Estonia.
The Baltic states were connected to the Russian energy grid during the Soviet Union and have spent the last 15 years preparing to connect to European systems.
Elering: Prices as expected

The frequency reserve market produced the expected prices, said Erkki Sapp, a board member of Estonia's system operator Elering.
"So far, prices have been as expected. In the first few days, system operators and market participants are still getting used to the auctions, so it's too early to draw far-reaching conclusions, but everything has been proceeding as anticipated," Sapp said at a press conference on Wednesday.
During Tuesday's auction, system operators procured reserves, or balancing capacities, from market participants for each hour of Wednesday.
Sapp explained frequency reserves consist of power plants and storage units ready to respond quickly to changes in the electricity grid, such as power plant failures, which create surpluses or shortages in the network, potentially threatening the 50-hertz frequency stability.
Reserve providers must be capable of immediately activating additional production capacity in case of a shortfall or reducing the output of their operating units when there is an oversupply, he said.
By Wednesday noon, another auction had already taken place for Thursday's frequency reserves. "This also went smoothly, and reserves are secured," Sapp noted.
Data provided by Elering show the average approximate prices over the two auction days were around €20 per megawatt-hour for mFRR and €143 per megawatt-hour for FCR.
"The FCR price is higher because it requires the fastest response time and has stricter requirements, and a smaller amount was procured," an Elering spokesperson explained.
"The supply of reserves has been sufficient, competition is quite strong, and a significant number of Baltic production and storage resources have qualified for the frequency reserve market and plan to submit bids daily," said Sapp.
Unique system in Europe
According to Elering's board member, the joint frequency reserve market of the three Baltic system operators is unique in Europe, as no other cross-border reserve procurement of this kind exists.
"But for us, this approach is very reasonable, as it significantly helps reduce costs for end consumers," he emphasized.
Sapp also noted that new participants, particularly battery storage units, are expected to enter the frequency reserve market this year, which should increase competition and drive prices down.
"Thus, the frequency reserve markets are up and running, everything is functioning, and we are ready for the weekend's disconnection from the Russian grid and synchronization with the Continental European network," he confirmed.
This article was updated to add comments from Elering's Erkki Sapp and more information about frequency reserve prices.
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Editor: Marko Tooming, Helen Wright
Source: Aktuaalne kaamera