Ensuring resource adequacy in the Finnish electricity market

Background

The report aims to raise awareness of future capacity adequacy and encourage further discussion on the potential for/design of future Finnish solutions in providing electricity adequacy.

"Finland has a remarkable set of drivers for developing renewable energy to meet carbon neutrality targets and attract new industry that will create benefits for the whole Finnish society. This important study supports the debate around how electricity market design could evolve to meet future needs", says Oliver Pearce, Director.

"Whilst the current market design has proven highly beneficial, the rapid pace of change required by carbon neutrality and electrification pose challenges for long term investment signals to ensure supply adequacy. Together with Fingrid, we have undertaken this interesting project examining viable solutions that can assist Finland in proactively addressing future needs. We would like to thank Fingrid and stakeholders for the opportunity to collaborate on this important topic", continues Matias Peltoniemi, AFRY project manager and market design expert.

Solutions

In the report, five short-listed solutions to tackle potential future capacity adequacy issues in Finland are presented:

1. EU proposal: Product for demand response as peak load shaving
2. Voluntary non-firm access rights
3. Interim crisis reserves
4. Targeted solutions for new investments
5. Market wide capacity solutions

These solutions aim to provide a mix that can alleviate the concerns in the short term in addition to the future. It should be noted that even if a capacity solution is implemented in Finland, retention of the current market design with reflective price signals, effective decentralised dispatch and transparency should be considered as a precondition.

Conclusions

There are viable solutions available; however, moving forward, swift action is required:

• Fingrid’s forecast shows capacity adequacy concerns in the future Finnish power system in tight weather conditions and/or major outages if no new firm and flexible capacity is reliably secured.

• Solutions that can bring new firm and flexible capacity to the Finnish system seem to answer the problem best.

• While there are viable solutions to answer the problem, most have challenges to be implemented in the short term. A sub-optimal interim solution may be needed.

• Given the potential emergence of the issues in the Finnish power system toward the late 2020s, the discussion and design of a cost-effective solution should start swiftly.