Electricity generation must always match consumption. If this balance is disrupted, it can cause equipment failures or widespread power outages.
Transmission system operators maintain ancillary service markets to secure reserve capacity for electricity generation and consumption. When electricity demand rises, additional power plants and reserves are activated. Conversely, when production exceeds demand, the transmission system operators can purchase consumption for the excess electricity generated, or the production can be decreased.
Battery energy storage systems are an excellent fit for ancillary service markets. They respond quickly and precisely to balancing needs in both directions: discharging energy into the grid when demand rises and storing excess electricity when production exceeds demand.
In this article, we’ll explore the following topics as they relate to the Nordic region:
Electricity production and consumption must remain in constant balance. This balance is measured by the grid frequency, which is ideally maintained between 49.9 and 50.1 Hz.
When consumption exceeds production, frequency drops. When production exceeds consumption, frequency rises. Deviations beyond this range risk damaging the grid and connected equipment.
If a large power plant, high-energy-consuming factory, or inter-country transmission line disconnects from the grid, frequency changes. This is where reserves procured by transmission system operators come into play. By utilizing reserve production or consumption capacity, grid operators restore frequency and maintain grid stability.
As the electricity grid is generally very stable, not all reserve capacity needs to be used regularly.
Ancillary service markets offer a market-based solution to balance fluctuations in electricity generation and consumption. Instead of owning massive capacity dedicated to frequency regulation, the transmission system operator procures balancing resources from the market.
Operators on the ancillary service markets are paid to maintain a specified amount of production or consumption capacity ready to respond to frequency changes. When frequency fluctuates, the transmission system operator activates this capacity, using the reserve products best suited for the situation.
In the Nordics, countries are part of the Nordic synchronous area—an alternating current (AC) system, where electricity is traded and transmitted between countries without the need for conversion to direct current (DC). Since the grid frequency must remain consistent across interconnected AC grids, Finland, Sweden, Norway, and parts of Denmark share the same 50 Hz frequency.
An operational agreement among Nordic transmission system operators specifies how much reserve capacity each country must procure at any given time.
For more information on the Nordic synchronous grid, visit Fingrid’s website. To see real-time data on how the Nordic grid operates and electricity trades between countries, check the Swedish transmission system operator Svenska Kraftnät’s website.
In the Nordics, transmission system operators manage the ancillary service markets. Transactions occur hourly, daily, or annually. In addition to procuring capacity locally, the operators also purchase it from other countries in the area.
The markets operate on an auction basis, where participants submit bids for their capabilities in various reserve products. These bids are ranked by price, and the transmission system operator selects the required capacity based on price order.
Annual agreements allow the operators to secure capacity at predictable costs. In addition, daily and hourly markets offer flexibility for procuring capacity closer to its actual usage.
Reserve products are classified by their response times. Generally, the faster a product can respond, the less of it the transmission system operator procures during normal grid conditions.
Reserve products are categorized from the fastest to the slowest response times:
Each reserve product has a specific role in maintaining grid balance, complementing the others. Generally, faster-response products are procured in smaller volumes.
During severe power shortages, transmission system operators can also utilize their own or third-party backup power plants. These resources are rarely used, reserved for exceptional circumstances when market-based capacity is unavailable.
Batteries are ideal for ancillary service markets due to their rapid response and precise control. They perform well in both under- and over-frequency scenarios: discharging stored energy to compensate for production shortfalls or storing excess electricity when production surpasses demand.
Technically, batteries can provide all types of reserve products. However, they currently focus on frequency containment reserves (FCR-N and FCR-D) due to market structure and size rather than technical limitations.
Participation requires more than just owning a flexible energy resource. Equipment and systems must meet stringent requirements, and sufficient capacity is necessary.
For example, in Finland the national transmission system operator Fingrid conducts tests to ensure physical devices and IT systems meet technical standards. These tests are product-specific, as requirements differ between reserve types.
Each reserve product has a minimum bid size. For example:
For smaller systems, virtual aggregation offers a solution. Multiple small batteries can be combined into a larger virtual battery, meeting the market’s minimum requirements.
For example, by combining ten 150-kilowatt battery systems, a 1.5-megawatt virtual battery can be created for the ancillary service markets. This enables participation in the markets that would otherwise be inaccessible for a single smaller battery system.
For those considering a battery energy storage solution, it’s worth evaluating whether the system can also enable access to ancillary service markets as it can make the investment more profitable.
Finland-based Cactos is one of the fastest-growing companies specializing in virtual batteries for businesses. Our platform aggregates connected battery energy storage systems into appropriately sized virtual batteries. This allows customers to benefit not only from the local advantages of battery energy storage but also from the additional revenue generated from participation in the ancillary service markets.
Despite being a buyer-dominated market, ancillary service markets continue to grow. Increasing renewable energy generation and the retirement of traditional rotating generators create a greater need for balancing services.
Technical standards for participation may tighten, ensuring higher-quality reserve products. This could phase out older capacity while encouraging innovation.
With Cactos, customers can support the national grid while benefiting from additional revenue from the ancillary service markets. Contact us to explore how energy storage solutions can work for you.
Learn more about Cactos’ battery energy storage solutions here.
