Elering launches procurement for long-term acquisition of new frequency reserves

Elering is announcing a public procurement for up to 500 megawatts (MW) of generation and storage capacity from the market, which is necessary for the independent frequency management of the electricity system.

Elering uses frequency reserves to maintain a balance in the electricity system and will expand their use in connection with the exit from the Russian electricity system and the integration into the continental European power grid next February.

“As some of the power plants currently providing reserves will leave the market in the medium term, and at the same time a large amount of renewable energy will be added, there will be a need for new reserves,” said Erkki Sapp, Member of the Management Board at Elering, commenting on the need for new generation and storage capacity.

The time limit for submitting tenders in the public procurement is nine months and the generation or storage equipment that offers reserves must be new. In view of climate policy objectives, a potential reserve provider will have to demonstrate how the reserve equipment can be transferred to renewable fuel in the future.

The Baltic States applied for and received a derogation from the European Commission, which makes it possible to acquire reserves in advance for the long term. “European Union legislation usually allows for the procurement of frequency reserves for a maximum of one day at a time, but Elering has successfully applied for the right to procure reserve capacity until 2033, or up to eight years in advance starting from synchronisation with the Continental European frequency area,” explained Sapp. “Long-term procurement of frequency reserve capacity is important because it provides investment certainty for energy companies when building new power plants or storage equipment.”

After the procurement and the award of the contracts, Elering will undertake to pay the successful service providers for the guaranteed capacity from the moment the winners of the procurement start making offers on the frequency reserve capacity market. The cost of purchasing reserves is included in the price of the balancing service provided by the balance responsible parties that bring together the electricity sellers and producers. Elering has to be financially neutral in the annual view and does not earn any revenue from the frequency reserve tariff itself, intermediating the balancing service via the reserves of balance responsible parties, which mainly benefit the owners of the generation and storage capacities operating in the Baltic States.