ACER decision specifies rules for the common Nordic aFRR capacity market

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ACER decision specifies rules for the common Nordic aFRR capacity market

With ACER’s decision, published on 17/8-2020, the Nordic TSOs can finally implement and establish a common Nordic market for the exchange of aFRR reserves. This is a crucial step in continuing the green transition of the Nordic synchronous area and succeeding with the implementation of the new balancing model. During the proposal process, the yearly economic benefits of a common Nordic market of 300 MW aFRR capacity was estimated at around EUR 50 million, that will benefit end consumers.

The Nordic TSOs would like to thank both ACER and the NRAs for an efficient process, that has tackled several crucial market design issues over the last 6 months. The high-level design of the Nordic aFRR capacity market will feature:

  • A daily market with common Nordic procurement executed in D-1
  • Gate Closure Time for BSPs will be between 07:00 – 10:00 in D-1, to be further specified
  • Market will use standard aFRR capacity bids with a minimum bid size of 1 MW and hourly validity
  • Pricing of selected bids will use the marginal pricing methodology (pay-as-cleared)
  • TSO will publish and submit an aFRR demand in MW per direction per bidding zone
  • The procurement function will optimise procurement across all 11 Nordic bidding zones using all the aFRR bids and the cost of transmission capacity as input
  • The cost of transmission capacity is the expected price difference in the day-ahead market + a dynamic markup of 1-5 EUR and is always used to favour the day-ahead market
  • By default, maximum 10% of transmission capacity between two bidding zones may be allocated to the exchange of aFRR capacity

 

The TSOs will now continue the detailed planning of the final IT development as well as intensify the work with market participants to onboard these before go-live. The TSOs will also consult the national regulators to get their assessments of the ACER decision. The Nordic TSOs aim for an aFRR capacity market go-live in Q2 2021. A more precise go-live date will be communicated in due time.

A common aFRR capacity market is a crucial building block in the overall NBM program, and a very important tool in the Nordic TSOs’ change from frequency-based balancing to ACE-based balancing. ACE-based balancing is a prerequisite to being able to connect to the European balancing platforms.