Fortum respons to Nordic TSO’s consultations regarding future Nordic balancing

Fortum has chosen to answer the two topical consultations on future balancing by Nordic TSOs with one response to all Nordic TSOs.

Fortum considers that balancing of the Nordic power system is a joint effort and expect a joint solutions from Nordic TSOs on developing the balancing market further. The Nordic power market should over time become harmonized, and Fortum is concerned that differing rules and governance models could endanger the efficiency of the Nordic power market and decrease the Nordic joint welfare. The ambition level in harmonization of market rules should be high.

We regret the fact the Nordic TSO’s have not been able to agree on one common proposal for the determination of LFC blocks. To ensure positive development, all Nordic TSO’s should work jointly, with a strong common commitment, towards even more efficient market models where the goal is to create bigger areas with common sets of rules, rather than splitting the market in smaller areas.

Consumers and producers in the Nordic market should be treated equally in a common electricity market, with one balancing price. As the Nordic power system is regional, there should not be no room for domestic benefits when developing the platforms for the future where competition should be free between all countries. The Spot market is a good example of a working market model, where marginal pricing is used and prices differ between bidding zones only due to congestions. The consulted solution should address the problems it aims to solve and preferably have a cost benefit analysis to give further understanding on the benefits of the proposed change. Now the proposed models are only generally described and such analysis is lacking. Fortum further believes that the Nordic region should have only one LFC block. Fortum does not categorically oppose a future development such as the MACE model, though we need much more information on details of such a model before we can give a reasoned opinion.

Reservation of transmission capacity for balancing purposes will likely impact the spot market, hence Fortum considers that all available transmission capacity should primarily be allocated to Spot, then intraday and finally for balancing market purposes.

Further Fortum feels that a well-functioning balancing market should incorporate following design principles:

  • The level of transparency should not hinder self-dispatching, rather it should promote participation of all potential flexibility in the system, even if said flexibility would not fit the strict demands of mFRR or aFRR. Increased transparency would also foster participation on intraday markets, where imbalances can be solved well before the balancing market. This means that market information from the balancing market should be made public in real-time.

  • Definitions of aFRR and mFRR should be as flexible as possible so as to give room for as much potential resources as possible, while still keeping the system on a safe side. This could boost competition on the market and also improve the security of supply.

  • A “polluter pays” approach can also improve the functioning of the balancing market when reasonable costs are allocated to the polluters, caution should anyway be used in developing the methodology, as such an approach can also easily be discriminating to market participants in bidding areas with little internal balancing capacity and congested transmission capacity.

Response to specific questions in Public consultation on the Proposal for Determination of LFC blocks in Nordic synchronous area by Fingrid Oyj

1. How do you see the LFC block structure for the Nordic synchronous area? Do you consider that the Nordic synchronous area should be one LFC block as today or do you see any reasons why the Nordic synchronous area should be divided into two or more LFC blocks?

Reply: Fortum would see it beneficial to have only one LFC block in the whole Nordics.


2. Do you see any risks if there exist several LFC areas in the Nordic synchronous area in which the power flows are optimized on bidding zone borders?

If yes, can you think of any measures to be implemented to alleviate these risks?

Reply: Fortum sees a risk that several LFC areas would lead to sub-optimization as opposed to optimizing needs of the whole synchronous area. Transmission needs in operational phase should not be limited due to MACE errors they should be solved in TSO-TSO balance settlement.


3. Which option do you prefer in Table 2 on page 11 in the supporting document? Please, justify and explain reasoning for your answer.

Reply: Options 1 and to 2 could be acceptable. We prefer option 1 for simplicity.


4. Do you consider necessary to carry out a study on the development Nordic LFC structure as suggested in Article 7 of the legal document? What should be the topics addressed in such study?

Reply: A cost-benefit analysis should be conducted before making major changes to the current market model.


5. Which kind of involvement from stakeholders would you foresee in future development of load-frequency control processes and structures?

Reply: Before making changes and agreements that potentially disrupt the market the stakeholders from the Nordic market area should be consulted. Any proposed changes should be supported by a cost-benefit analysis. Any proposed changes should be explained in detail in consultation documents (with practical examples) so that stakeholders can understand the goal of the proposed change and the benefits as well as caveats in any proposed new model.

Fortum's response in pdf file