Working group to explore ways to promote security of supply and flexibility of electricity market
The increase in variable renewable electricity generation has increased the variation in the supply available on the market, and as a result, affected security of supply and increased the fluctuation in electricity prices. Generation may vary significantly within days, between days and at different seasons, sometimes unpredictably.
The rapidly increasing variable electricity generation challenges the current electricity system in many ways. In order to respond to these challenges, it is necessary to have flexible demand for and supply of electricity, which is primarily developed on market terms, as well as various energy storages. At the same time, it is important to consider whether the supply of flexible capacity should be increased and market entry speeded up by government measures and within the limits allowed by EU legislation.
The Ministry of Economic Affairs and Employment has appointed a working group to prepare a proposal for creating a support mechanism for non-fossil flexibility under the EU Regulation on electricity market design. The work will also support the preparation of the Government’s Energy and Climate Strategy. The working group should submit its proposal to the Ministry by 28 February 2025.
“Growing generation of renewable electricity determined by the market will significantly increase Finland’s self-sufficiency. However, investments in variable renewable generation also require a sufficient amount of flexible demand and generation capacity to maintain security of supply and curb price fluctuations. This is important for both consumers and for attracting electricity-using industries to Finland," says Minister of Climate and the Environment Kai Mykkänen.
Large fluctuations and unpredictability require new resources for the electricity system. While the prices of different marketplaces for electricity give a signal to invest in required capacity, the investments are slow due to the uncertain returns.
The Government Programme outlines that there is sufficient electricity in Finland at an affordable price even during periods of freezing temperatures with no wind. As per the Programme, the construction of electricity and heat storages should be promoted in order to obtain a demand side response. Moreover, flexible generation and consumption will be coordinated and system integration improved through flexibility arrangements and storage solutions.
The EU Regulation on the new electricity market design imposes an obligation for Member States to define an indicative objective for non-fossil flexibility. The objective must be based on a report on the estimated flexibility needs. According to the Regulation, Member States may introduce a non-fossil flexibility support scheme in order to achieve this objective.
Tatu Pahkala, Chief Specialist at the Ministry of Economic Affairs and Employment, was appointed the chair of the working group. The members of the group come from the Ministry of Finance, Energy Authority and Finnish Competition and Consumer Authority. The permanent experts of the working group represent Finnish Energy, Association of Energy Users in Finland, Local Power, Technology Industries of Finland and Fingrid Oyj. Petri Hirvonen, Senior Specialist at the Ministry of Economic Affairs and Employment, and Henri Hämäläinen, Specialist at Energy Authority, serve as the secretaries of the working group.
Inquiries:
Lyydia Ylönen, Special Adviser to the Minister of Climate and the Environment, tel. +358 50 476 1341
Tatu Pahkala, Chief Specialist, Ministry of Economic Affairs and Employment, tel. +358 295 064 217