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Mechanism for long-term balancing capacity reserve procurement – public consultation

 

Elering invites You to participate in the public consultation for a mechanism to support long-term balancing capacity reserve adequacy in Estonia. The aim of the mechanism is to aid the provision of sufficient reserves by introducing long-term contract of reserve capacity.

In terms of market-based investments into reserve providing resources, the challenge described by market participants has been the certainty of investment environment. While it is known that significant reserve capacity will be needed in Estonia and Baltics, it is not certain what resources will actually be available and what will be the market price dynamics. As the Baltic balancing capacity markets are scheduled to start in the beginning of 2025, there is a lack of accurate solution for price discovery. It is equally difficult to forecast the price dynamics for the whole period relevant for an investment decision. In conclusion, there is a barrier for new investments, while new investments are critical in view of operating in the Continental European synchronous area.

The long-term contract mechanism is designed to complement the Baltic LFC block balancing capacity and energy markets. The proposed Contract for Difference (CfD) solution would be linked to the price of the Baltic FRR capacity market. As such, it aims to be a least cost solution for the Estonian electricity consumer, while providing investment certainty for new resources.

The public consultation is aimed at gathering feedback on the high-level design of the proposed mechanism (annex of the letter) in order to make it as efficient as possible in its task to provide sufficient reserves. When providing feedback to the mechanism, among other topics, please consider also the following questions:

  1. Would the mechanism help to provide investment certainty and bankability for new resources to provide frequency reserves?
  2. Which details should be added to the mechanism to make it work/increase its efficiency?
  3. Which details are not useful for achieving the goal?
  4. What is a realistic amount of time between the auction and the time of delivery?

Please provide your responses by 19th of January on the email address: lauri.oks@elering.ee. Please use the same contact in case of additional questions

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