Participating in the electricity reserve market can be beneficial for renewable energy power plants that produce a lot of electricity, as it provides an opportunity to support the electricity grid and be compensated for providing the reserve. With the help of the reserve market, you can diversify the earning models of the production unit and make more versatile use of the investment. In this blog, I discuss a little about how renewable energy sites and electricity storages can be utilized in accordance with the latest technologies and how to get familiar with the matter.

The possibilities of the reserves markets can be approached from different aspects. Here are five tips to consider before participating in the reserve market: 

1. Production profile of the facility effects possibilities. In the reserve markets, the participants guarantee a power change of a certain amount up and/or down at the required moment, so it is important to know at which moments the power is available. A few basic pieces of information should be clarified. How steadily does the power plant produce electricity? Can production be accurately predicted for the next day? In which direction would it make sense to adjust (power increase or decrease)?

• Wind power follows a different production distribution than solar power, although both are dependent on environmental factors. The electric storage, on the other hand, can easily implement both up and down regulation, as long as the battery charge level allows it. 

2. Choose the most suitable markets. In Finland, Fingrid maintains several different reserve market products, each of which has different requirements regarding the speed, direction and frequency deviation that requires activation. The questions in the previous section will help you narrow down reserve market products suitable for your target. 

• For example, the down-regulation product of the frequency-controlled disturbance reserve (FCR-D) only requires a power drop when the network frequency rises to a certain level. Thus, at other times you can produce energy at the power plant in full. 

3. Evaluate the returns of different reserve markets. The compensations paid for reserve products are based on the offers made by market participants and the need for adjustment determined by Fingrid. Different reserve products have their own price for each hour.

• Prices can occasionally have large intraday fluctuations. Realized reserve amounts and prices can be viewed e.g. from the statistics maintained by Fingrid. The length of the comparison period should be long enough so that the seasonal fluctuations of the production profile will be taken into account.

4. Find out the costs: In the case of renewable energy production, e.g. the occasional drop in produced power does not greatly affect the returns from the actual production, while in the case of electricity storage, the wear and tear of the battery cells due to repeated discharge and charge cycles significantly affects the profitability of the frequency control. 

• The return of investment of the resource or its use is not carved in stone; during the life of the investment, market trends and earning models may change. New ways to optimize income may emerge along the way. An adaptive energy management system that can be developed as needed is an advantage here.

5. Find out the necessary technology. In addition to the systems responsible for controlling the production equipment itself, the reserve operator must organize the necessary data transfer with Fingrid. This includes the sending of reserve market bids and the reception of accepted bids.

• Fingrid encourages market players to implement the ECP data exchange platform, which enables the data transfer of bids and activations data in an automated manner using interfaces. In addition, certain production data of the reserve site must be reported to Fingrid in real time, on the basis of which the compensation to be paid is determined.

An energy management system completes the package 

As shown in previous blogs, the importance of software in the energy sector and electricity market is growing. The profit opportunities of production units are becoming more versatile, and to enable this, energy management systems must be able to manage ever larger entities. The operation should also be as automated as possible. Someone could say that you can't live without software. In addition, they provide opportunities to earn money that was not even in the original investment calculation. And this without huge investments in production equipment.

It has been described above what should be investigated and what factors should be taken over in order to utilize the power plant's capacity in suitable reserve markets. In most markets, the bidding, bid acceptance, delivery and reporting happen so quickly that it is impossible to manage it without  automating it by dedicated software. Restrictions and rules are coded into the energy management software and they can be used to implement the desired strategy.

The profit potential increases significantly when you know how to offer the right amount at the right time to the right market.

P.S. The letters A and I were not even mentioned above. In all markets, it is good if you can predict and forecast. For this purpose, artificial intelligence -based solutions have been developed, which are rapidly coming into market. Data is collected from numerous different sources in order to be able to more accurately predict future price developments in the market.

More on these later.

The author of the blog is Energy Expert and Project Manager M.Sc. Tommi Siponen