Nordic TSOs move to dynamic reserve purchasing

The Nordic supply authorities have approved a new dynamic approach for the purchase of operating reserves by the region’s TSOs.

In effect, and analogous to the telecommunications area, the Nordic transmission system operators (TSOs) will move from a ‘flat rate’ subscription to flexible purchasing, Danish TSO Energinet has announced.

With the increasing fluctuations due to the intermittency of the increasing penetration of renewables, this new approach – named ‘dynamic dimensioning’ – is anticipated to ensure both greater security of supply for electricity consumers and cheaper supply, as the purchases of the reserves will be more accurate and based on what is actually needed.

“As the electricity system is increasingly powered by wind and solar, TSOs will no longer buy fixed amounts of reserves, but forecast hour-by-hour the varying demand,” says Thomas Dalgas Fechtenburg, Head of System Services at Energinet.

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“The more renewable energy there is as the wind blows and the sun shines, and the more fluctuating electricity consumption becomes, as we electrify society with electric cars, heat pumps and large hydrogen plants, the greater the fluctuations in the specific need for reserves and the further away from the ‘constant’ the needs in individual hours become.”

In addition, the purchase of reserves across the Nordic borders based on a common platform should ensure more efficient and socio-economic operation of the electricity systems, with the larger market leading to lower costs.

With this ‘smarter’ procurement, among other factors that can be taken into account is the reserve power in neighbouring countries and the fact that countries’ need for reserves is rarely simultaneous.

Energinet reports having been working on the new solution for about three years, with Denmark, with its high share of electricity production from wind and solar, one of the first countries to feel the need to rethink the purchase of reserves.

In recent years, Danish expenditure on system services has increased significantly, almost doubling from DKK1.4 billion (US$206 million) in 2021 to DKK2.7 billion (US$398 million) in 2022. In addition to the need for increasing reserves, the price of system services is rising because several of the traditional power plants that have historically provided reserves are closing or running for fewer hours, while new players are only now entering the market.

The new method will be implemented in steps, with the first step to predict deviations in forecast consumption and production from the wind and solar on a day ahead basis.