The energy transformation has a powerful impact on the electricity market and its participants. The production structure is shifting towards clean and CO2-free forms of generation, which in Finland means a substantial growth in wind and nuclear power. The need for flexibility in the power system is increasing across the board, as the adjustable fossil fuel-based production decreases. Hydroelectric power will remain a key source of energy and flexibility. The role of the international electricity trade will become even more important. Demand-side participation in the electricity market as a source of flexibility will increase and the role of consumers will become more active.
The wholesale prices of electricity were slightly lower than in the previous year in both Finland and the other Nordic countries in 2019. However, the prices did not decline back to the pre-2018 level. The decline in the prices was impacted by the improved precipitation in the Nordics compared to 2018. The availability of wind power also had a clear impact on the area price of electricity in Finland at times. The prices of emissions rights remained on a par with the level they had attained in 2018.
Day-ahead system price, €/MWh
|Area price Finland, average €/MWh||44.04||46.8||33.19|
|Congestion income in Nordic countries, €M||281.98||265.8|
|Congestion income between Finland and Sweden, €M||130,995||56.47||50.98|
|Congestion hours between Finland and Sweden, %||40.1||23.6||26.8|
|Congestion income between Finland and Estonia, €M||14.97||2.79||0.52|
|Congestion hours between Finland and Estonia, %||11.8||5.4||1.4|
The most market favourable TSO
During 2019, Fingrid redefined electricity market services with its customers. We offer the electricity market participants a single bidding area for electricity trading in Finland. To increase the north–south transmission capacity, we are carrying out the 400-kilovolt Forest Line transmission project, which will help to keep Finland as a single electricity trading area.
Through Fingrid’s transmission grid and the cross-border transmission lines, market participants gain access to and can reap the benefits of an open European electricity market. We are currently planning a new cross-border transmission line between Finland and Sweden, jointly with the Swedish TSO. The interlink is due for completion by 2025 and will increase the transmission capacity between Finland and Sweden by 800 megawatts once finished.
We provide the market with the highest possible transmission capacity at all times, which enables effective trading for the market participants. In 2019, the reliability of Estonia’s DC connections was weaker than in previous peak years, but despite the challenging situations, the connections were efficiently restored for use by the markets. The usability and reliability of Sweden’s DC connections have been at an excellent level.
Electricity generation and demand guided by pricing
Finland is an integral part of the European electricity market. The auction system on the European day-ahead market, which covers more than 80 per cent of the estimated European demand, sets the prices and buying and selling volumes for each of the following 24 hours. A large, well-functioning market enables efficient entry into the market, on market terms, for the electricity from weather-dependent renewable energy sources. The electricity market also has a key role in making the power system cleaner and in electrifying other sectors such as heating, traffic and industrial processes.
The day-ahead market is complemented by the intra-day market based on continuous trading. The marketplace was taken into use in 14 European countries in 2018, including the Nordic and Baltic countries. Eastern Europe was coupled to the pan-European market in November 2019, which makes possible intra-day electricity trading using interlinks such as between Sweden and Poland as well as Lithuania and Poland.
In summer 2019, competition was enabled between power exchanges in Central Europe. Since then, electricity sellers and buyers have been able to choose their preferred power exchange. The implementation and testing of the system modifications required by the competition between power exchanges are underway in the Nordic and Baltic countries. In December 2019, Fingrid, together with the other Nordic and Baltic TSOs that hold shares in Nord Pool Holding AS, entered into a binding agreement to sell the majority of the company’s shares to Euronext Nordics Holding AS, a Norwegian company fully owned by Euronext N.V. The background factor is EU regulation, which has driven the development of power exchanges from regional monopolies to competitive European marketplaces. Fingrid’s strategy, as a natural monopoly, does not include owning competitive businesses.
In June, Fingrid announced that it would enable intraday trading within Finland until the start of the delivery hour. Finnish market participants have expressed a preference for having a possibility to trade closer to real time. The exact schedule depends on the decisions made by the power exchanges active in Finland to offer their customers a possibility to trade until the start of the delivery hour.
Help from the markets to balance the power system
The shift into a clean electricity and power system requires updating in the electricity market structures and practices. It is necessary to update the market rules to ensure continued cost-effective and secure balancing of the power system in the future, as a growing share of the electricity production comes from variable renewable energy. Simultaneously, the electricity market is also being developed from the EU’s common market point of view; the goal is to enable an efficient European common market for electricity.
During 2019, Fingrid actively developed the electricity markets as part of the Nordic imbalance settlement project and participated in European joint development work in ENTSO-E, the European Network of Transmission System Operators of Electricity. Fingrid has additionally implemented measures to promote the electricity market in Finland.
The Nordic imbalance settlement project automates the power system’s imbalance settlement, in other words the real-time balancing of electricity production and consumption. The project also develops new Nordic marketplaces for automatic and manual frequency restoration reserves. These marketplaces will enable TSOs to procure the reserves necessary for imbalance settling. The project also prepares the Nordic TSOs to join the pan-European reserve marketplaces currently under development.
Following the imbalance settlement project, the Nordic countries will implement a shorter imbalance settlement period enabling 15-minute trading and a new imbalance power model. The Nordic project’s updated roadmap was published in November 2019. During 2019, a regularly meeting reference group composed of the key stakeholders was established for the project.
Finland is the only Nordic country to publish real-time balancing power pricing data. In 2019, Fingrid started to publish the price of the last activated balancing power bid whenever Finland is decoupled into a separate regulation area.
All Nordics into joint imbalance settling
On 14 May 2019, the Danish TSO Energinet and the imbalance settlement company eSett’s current owners Fingrid, Svenska kraftnät and Statnett signed an agreement according to which Energinet joined the Nordic Balance Settlement by becoming a co-owner of eSett Oy. Each party owns 25 per cent of the company. The Danish market participants will join the Nordic Balance Settlement in the fourth quarter of 2020 once the regulating authorities approve the new market processes.
Adopting all sources of flexibility in the power system
The transformation of the electricity production structure, where inflexible capacity is replacing adjustable capacity, calls for enabling a market entry for new flexibility resources that are different from the past and often small in scale, and utilising them to balance the power system. Such flexibilities may include increasing or decreasing the production or the consumption, or charging up or discharging energy storage systems to balance the power system.
In autumn 2019, Fingrid launched a pilot where the minimum bid size in the balancing energy market was lowered from five to one megawatt. The purpose of the pilot is to ease entry to the balancing energy market and the transition towards the European balancing market.
The EU-funded INTERRFACE flexibility market project, a part of the broad-ranging Horizon 2020 programme, continued in 2019. INTERRFACE involves testing a flexible market platform in Finland, Estonia and Latvia. The platform can be used by the TSOs and DSOs for procuring flexibility resources and it offers a marketplace for selling electricity from small-scale renewable sources or demand-side management services, for example.
The European Commission granted Project of Common Interest status to the preparations for the CrossFlex flexible resource project in October 2019. CrossFlex is a project proposal by Fingrid and the TSOs of Estonia and Åland with the aim of promoting the large-scale utilisation of the flexibility provided by distributed decentralised resources locally, nationally and between Finland and Åland as well as between Finland and Estonia.
Fingrid has been testing aggregation models in the balancing energy market and launched an independent aggregator pilot in the balancing energy market in 2019. The aim is to allow reserve providers to collect or aggregate decentralised flexible resources out of the balances of other electricity market participants. This enables new kinds of business models and makes it easier for new participants or resources to enter the reserve market. The aim is to continue the pilot project and expand it in 2020 to gain additional experience.
Construction of Datahub moving forward
Fingrid is building a centralised information exchange system for electricity retail markets, Datahub, which will contain data from about 3.7 million electricity metering points. In 2019, it became apparent that some distribution system operators and retailers will not able to implement the necessary changes in their own customer and metering data management systems to reach Datahub readiness in time. The initial target go-live schedule for Datahub was April 2021. The new go-live date was confirmed in a Government Decree that entered into force in early December 2019. According to the decree, the Datahub will go live on 21 February 2022. Fingrid is co-operating closely with the entire sector to achieve a successful Datahub go-live.