A week has passed since the launch of the trilateral mFRR capacity market, enabling mFRR capacity trading between Sweden, Denmark, and Finland. The key difference from the national markets is the introduction of the ability to reserve capacity on the SE4-DK2 and SE1-FI lines. At Optimeering, we have been collaborating closely with the Transmission System Operators (TSOs) to ensure that the clearing algorithm developed for the national mFRR capacity markets is also suited for the new trilateral market.
Analyzing the first week of the trilateral market and comparing it to the week prior to its launch, we observe several notable market outcomes. In terms of procured volume across the three countries, both Denmark and Finland saw an increase in the average hourly procured volume for both mFRR up and mFRR down. Denmark with 81 MW for up and 37 MW for down, Finland with 48 MW for up and 6 MW for down. Meanwhile, Sweden had a decrease of 114 MW for upward regulation and 43 MW for downward regulation. These changes align with expectations, as historically, Finland and Denmark have had lower prices compared to Sweden and more bids would be accepted from the lower priced areas and fewer from the higher priced area when connecting the markets together, everything else being equal.
Visually for mFRR up volumes procured shown in figure below.
The historical pricing trend was evident for upward regulation in the week leading up to the launch of the trilateral market, where Finland and Denmark experienced lower mFRR prices. The first week of the new market saw prices converge, with prices in Denmark and Finland rising, while prices in Sweden decreased. This adjustment reflects the expected impact of market coupling, explained above. Interestingly, just prior to the trilateral market’s launch, Swedish prices were higher than those in Finland for downward regulation. The first week of the trilateral market saw an increase in prices in Sweden and Denmark, while Finland’s prices decreased.
Average prices in EUR/MW for mFRR in the week before (national) and after the Trilateral market started is presented in the table below.
Up | Down | |||||
DK | FI | SE | DK | FI | SE | |
National | 4.4 | 1.6 | 28.0 | 0.0 | 10.6 | 8.8 |
Trilateral | 13.7 | 4.5 | 22.7 | 2.2 | 7.8 | 12.1 |
It is also noteworthy that Denmark has no national demand for mFRR downward regulation, which resulted in prices rising from 0 to 2.2 EUR/MW. This shift now provides market participants in Denmark with a market to sell mFRR downward capacity, which was previously unavailable.
When there are no congestion issues on a line, the mFRR capacity price is equal for price connected by the line. In terms of pricing alignment, during the first week of the trilateral market, prices were equal in 75% of hours for upward regulation and 16% of hours for downward regulation on SE4-DK2. For the SE1-FI line, prices were equal in 23% of hours for upward regulation and 22% of hours for downward regulation.
Looking ahead, it will be interesting to monitor the market and observe how market participants may adjust their behavior in response to the new opportunities presented by this market.
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