Value of common Nordic aFRR capacity market confirmed
A first-of-its-kind evaluation report confirms that the Nordic capacity market for automatic frequency restoration reserves (aFRR CM) has great socio-economic value while also improving the security of supply.
The purpose of the common Nordic aFRR CM is to utilize capacity resources across the Nordic bidding-zones to allocate frequency restoration reserves capacity where needed across borders. The aim is to improve overall Nordic socio-economic welfare and security of supply by sharing capacity across borders.
The evaluation report
A recent evaluation report by the Nordic Balancing Model project evaluates the value of the aFRR CM from its go-live on 8 December 2022 to 24 March 2023 as well as the methodologies used to forecast the need for reserves. The common market gives market participants a larger playing field as bids can be activated across the Nordic region. Producers in high-liquidity areas benefit from this, while low-liquidity areas benefit from a security of supply perspective as they get access to more reserve capacity.
The Nordic TSOs welcome these conclusions as both the anticipated economic benefits and the simple forecasting approach have been questioned in the past.
This report and the results in it are the first of their kind in Europe and the Nordic TSOs are proud to present the results publicly. The hope is that the report can serve as inspiration for other regions working to introduce cross-zonal capacity allocation. positive socio-economic effect of the aFRR capacity market is a positive confirmation of the overall goal for the NBM program and clearly indicates that we are on the right track.