How the balancing market works and what profit opportunities it offers companies
Following the successful synchronization of the Baltic States' electricity networks with Europe, companies are also being encouraged to participate in the new balancing markets – frequency containment (FCR) and frequency restoration (aFRR and mFRR) – to help ensure the balance of the energy system. Enefit already manages the largest balancing portfolio in the Baltics, offering companies the opportunity to use their electrical equipment to generate additional income.
To ensure the stability and security of the electricity system, a constant balance between electricity production and consumption is necessary. After connecting to the European energy grid, this responsibility is redistributed among market participants. A/S Augstsprieguma tīkls predicts that the amount of reserve capacity that will need to be provided in the Baltic region will increase by approximately 50% over the next six years.
With the opening of balancing markets, all market participants can participate in compensating for system imbalances. Balancing can be achieved with both electricity generation equipment and consumption devices that can be flexibly adjusted by reducing their operating capacity or temporarily disconnecting them from the grid. There are three main segments in the balancing market: frequency containment (FCR), automatic frequency restoration (aFRR) and manual frequency restoration (mFRR) reserves. The requirements for each segment differ in terms of response speed and flexibility, so a company's ability to participate in one of them depends on the technical capabilities of its specific equipment.
Enefit is one of the first electricity companies in Latvia to offer access to new balancing markets through a Virtual Power Plant. This technology connects consumers to the electricity system operator using specialized equipment that provides remote control. The installation of the device requires a one-time, relatively low investment and does not require additional maintenance fees.
After the equipment is integrated into the Virtual Power Plant, Enefit, based on forecasts and experience in the electricity markets, makes the most advantageous transactions on the balancing market on behalf of the customer. This allows companies that are able to suspend or reduce the operation of electrical equipment at certain times to generate additional income and reduce their electricity costs by up to 15%.
Enefit already manages the largest balancing portfolio in the Baltics, successfully serving companies in various industries with different balancing capabilities. For example, a pulp manufacturer in Estonia, participating in the balancing market with a wood chipper with a total capacity of 800 kW, earned just under €700 in the first two weeks of the year. A food production company, on the other hand, earned €250 in one month by using a 155 kW compressor to cool cold storage rooms.
Although participation in balancing markets is automated, the company retains the ability to control the operation of the equipment by setting specific time periods, capacity limits and other operating settings. Once the company has identified the appropriate equipment, Enefit conducts a compliance audit, concludes a cooperation agreement and integrates it into the Virtual Power Plant. All transactions and income are transparent on the customer portal, where Enefit experts are also available to provide support.
Companies that do not have flexible equipment still have the opportunity to participate in the balancing market by using energy storage batteries. These can respond quickly to market demands and are particularly suitable for balancing. Enefit offers a complete solution: from equipment delivery and installation to software and service maintenance.