Thirteen Bids Submitted for Long-Term Reserves Procurement, Totaling 677 Megawatts
By the deadline on Thursday, Elering received 13 bids totaling 677 megawatts for its public procurement of long-term frequency reserve services.
According to the terms of the procurement, Elering intends to conclude contracts for the purchase of up to 500 megawatts of reserve services. The selection of counterparties will be based on an evaluation methodology, under which the total annual cost of the service may in no case exceed 50 million euros. This cost ceiling will also determine the actual contracted volume, which may amount to a few hundred megawatts.
The bids submitted offer prices for one megawatt of reserve per hour in the range of 15.1 to 55 euros.
“This is one of the most complex procurements in Elering’s history and likely in the history of Estonia’s energy sector as a whole. The unexpectedly high number of bids and market participants is a recognition of both Elering’s experts and the market players, reflecting their joint efforts in refining the service conditions,” said Erkki Sapp, Member of the Management Board of Elering.
“Now begins the substantive review and evaluation of the bids, during which the qualifying bids will be identified and it will be determined with how many bidders and to what extent contracts can be concluded within the cost ceiling. The outcome will be clear within the next couple of months,” Sapp explained.
Under the procurement, bilateral contracts for difference will be signed with the successful bidders. This means that Elering will pay the bidders when the market price of reserves is lower than the price fixed in the contract. If the market price of reserves exceeds the contract price, the bidder will pay the difference to Elering.
Elering will begin purchasing reserve services from the winners of the procurement once they start submitting bids to the frequency reserve market. The winners are required to commence submitting bids no later than five years after the conclusion of the contract. The contracts for the provision of reserves will remain valid until the autumn of 2033.
The procurement for the long-term purchase of frequency reserves was launched in July last year, made possible by a derogation granted by the European Union.