Ville Rimali, Taaleri Energia

It has been profitable. Of course, we were one of the first movers with the bigger capacity on the market, and we had pretty high revenue expectations. Luckily, Capalo AI has been able to beat those high expectations, slightly even on top. We are definitely considering the extension.

Henri Taskinen, Capalo AI

Currently, in Finland, 15–20% of revenues are intraday/spot, but I think this will be closer to 40% in some years for the Finnish and Nordic markets.  This could grow to even 50% or over of the revenue stack in the next 5 years. This is how we see that the revenue stack is evolving, and my best estimate would be around 40-50% of revenues in 3-4 years.

Henri Taskinen, Capalo AI

Good question. Yes, those are net revenues, so they take into account all costs from activations and wholesale purchases, and of course, the revenues obtained from delivering, so selling to the wholesale markets or the energy activation markets, and the FCR-N energy compensation, and possibly all other cost components. For example, if you would have unmaintained capacities, then you would get the cost component from those as well. But in short, that is the net revenue that we are showing, so all revenues and costs netted.

Henri Taskinen, Capalo AI

It is currently roughly 1MW/1.16MWh. The market is currently shifting more towards 2h duration. Right now the market is dominated by 1h market, but due to the growth volatility and value of the energy intensive markets, we see that the 2h is becoming the norm here.

Ville Rimali, Taaleri Energia

We also see that the market is moving towards 2-hour batteries, and it’s more driven by the cost development of the equipment, not necessarily the market change. The battery prices have substantially decreased in the past year.

Henri Taskinen, Capalo AI

Right now, it’s roughly half and half. Half comes from the capacity fees, when you maintain capacity for the day ahead, and half comes from the energy market side, so intraday, spot, and energy activations for aFRR, mFRR, and FCR-N energy compensation.

Ville Rimali, Taaleri Energia

I think we are a bit conservative. When selecting the technology, we usually use Tier 1 suppliers for the batteries and inverters, and we are not currently doing investments in anything other than lithium-ion technology.

Tuomas Mattila, Fingrid

That’s a good question. Indeed, there was a difference in the graph I showed. Electric boilers should not be counted as energy storage, so they are consumption figures in those technology charts. I would need to check the data discrepancy.

Tuomas Mattila, Fingrid

Fingrid joined Picasso in March, and actually, we are buying the same amount of energy or using the same method to calculate the needed aFRR activations in Finland. It is currently under the Nordic frequency, so that has not changed. But what has changed with Picasso is the cross-border trading. So once Elering also joined from Estonia, and the Baltic countries joined Picasso, we got the Finnish-Estonian border open in May, and that means that there is aFRR energy exchange between Elering and Fingrid, and that changes the activated aFRR energy in Finland. So, sometimes we get more activations, and sometimes less, depending on the market situation. In the future, when all the Nordic TSOs have joined Picasso, the activations team will change into area control error-based activation, leading to an increase in activated volumes. But that will happen in some years.

Tuomas Mattila, Fingrid

If the system size grows, the need for ancillary services and BRPs also increases. Looking from the grid’s perspective, the more flexible the new consumption, the more efficient the system itself is. So, of course, we highly encourage the new data centers to be flexible and to be able to participate in the electricity markets, and why not even balancing or reserve markets.

Ville Rimali, Taaleri Energia

Our battery is on that market, so there are batteries in that market.

Tuomas Mattila, Fingrid

Batteries are active in mFRR, but those were most likely left out of the charts because we do not have similar prequalification data for those.

Henri Taskinen, Capalo AI

We already have over triple-digit MW of batteries operational in Finland’s mFRR market. These are moving so fast that charts would have to be updated constantly.

Henri Taskinen, Capalo AI

You have to estimate the activations for your bid. You cannot purely bid based on the price component because then, when you are putting capacity there, you could end up in a situation where you cannot deliver anymore because you have reached the daily cycle limit. You need to consider that when you bid to the market, so you need to have a plan for energy management. Intraday plays a role here as well. When you have bid to the capacity market, you can still do intraday energy management during the day, if the battery is online in intraday.

Ville Rimali, Taaleri Energia

It is also good to remember that typically the cycle limit in warranty terms is annual, so you don’t need to stay within the warranty limit every single day.

Henri Taskinen, Capalo AI

It is basically dynamic, based on the market condition and battery condition, so if there would be a good price after activation to another side, then of course you need to take into account how good is the price and should we activate right now, and for the whole horizon – if we are close to full now, we need to get rid of some of that energy for the future, if we want do something else in the future. So basically, you do not only need to optimize for the next moments in time, but for the whole horizon to really maximize value.

Tuomas Mattila, Fingrid

Currently, we do not have any short lines for balancing service providers for grid connections, so they are on the same page as others. We do have some areas in Finland where there is currently limited capacity on the grid, which is why we highly encourage the big batteries to go to places where there is sufficient capacity available on the grid. Batteries typically can be located almost anywhere, and they are not dependent on a university or workforce, so we try to push those to the right places. Regarding the prequalification process, by law, we need to do it within 8 weeks, but if all goes well, we can do it within 2-3 weeks. After that, there are other market entry things, such as setting up real-time and market communication, etc. That can take from some weeks to months, depending on the BSP’s readiness.

Ville Rimali, Taaleri Energia

My experience as the asset owner, and what I have seen and heard in the market, is that grid modeling is typically the longest lead item on that process, and it can easily take months. So it is quite safe to say that when you start building your battery, you should start the grid modeling exercise almost at the same time to ensure that you are ready to commission when the asset is ready.

Tuomas Mattila, Fingrid

Good question. There are no firm plans. There is a fossil-free capacity mechanism in Finland under the Ministry of Energy, but that will most likely be some kind of investment support, if I have understood correctly. And that is still under development, and is not the responsibility of Fingrid.

Ville Rimali, Taaleri Energia

From the Battery owners’ and traders’ perspectives, we are not very excited to see any capacity mechanisms, as those typically harm the market substantially. We see that the Finnish market is now finally providing good investment signals to get flexibility in the system.

Tuomas Mattila, Fingrid

From Fingrid’s perspective, short-term balancing will not be a problem in the future. There is market turbulence now, but I’m sure it will be fixed. Then, those more extended periods – one week or two weeks of low wind during the cold winter – can be an issue that is harder to solve with energy on the markets. That is why we have also supported the work that the Ministry of Energy is doing.

Ville Rimali, Taaleri Energia

Why not? They provide flexibility in both directions.

Tuomas Mattila, Fingrid

If there is some consumption in the grid, and it can be flexible, we definitely welcome it to the balancing markets.

Ville Rimali, Taaleri Energia

I think I have a bit of a conservative answer, but a little longer duration batteries. There is room for those, and that has been the way the market is developing elsewhere as well.

Henri Taskinen, Capalo AI

I agree with Ville. The Finnish market is transitioning to two-hour and maybe even longer durations in the future. That is the market evolution happening elsewhere as well.

Tuomas Mattila, Fingrid

If I may add to that, on the system level, I believe that the batteries will be more and more important in affecting the short-term balancing price, or the price of the short-term energy within intraday or ancillary markets. I would also like to see the battery industry and the optimizers participate in the discussion on what this means for the market model or the data we provide. For example, should there be real-time data on the system’s combined state-of-charge batteries, or what kind of market data would be needed to operate that system efficiently? That is an interesting question because we have typically been a hydro-dominated system in the Nordics. I believe the short-term balancing will, after some years, not be hydro only anymore, but batteries also. And what does this mean for all the data flows and the market design? That is a good question.

Tuomas Mattila, Fingrid

From my perspective, the market-based approach is for the customers. We believe it is the most efficient way to balance the system and minimize the costs for the end customers. But of course, there is a different level of data provided, etc, between the TSOs, and we at Fingrid try to at least think we are very customer-centric. We always welcome being challenged on what kind of data we should publish or what would be good for the markets, to make it the best for all market participants, and enable efficient balancing. That is my message: please challenge us on what kind of data you need and what kind of blockers there are for balancing assets, etc.

Ville Rimali, Taaleri Energia

We definitely see that both in Sweden and in Finland, the ancillary services market will probably saturate, probably even pretty soon, and could be even this year. Going forward, if comparing Finland and Sweden, we see that in Finland, there is a better opportunity for market arbitrage on the day ahead and the intraday market because we have a higher share of wind in the energy mix and fewer interconnections to other countries than Sweden. Thus, we see that in the longer perspective, Finland could be a more attractive market compared to Sweden for batteries.

Henri Taskinen, Capalo AI

To end this saturation question, that is why it is so important to participate in all of these revenue streams, because some can saturate faster than others, and some can even increase in value, as we have seen in intraday. As Ville, you went through a great example: every month, it can change, and every day, it can change. That is the whole point of the multimarket optimization approach.

Please see Tuomas Mattila’s answer below.

Tuomas Mattila, Fingrid

In Finland, the FCR-N, we remunerate it based on frequency and the maintained reserve. It is the balancing service provider in Finland that receives this energy compensation. We use the imbalance price for the FCR-N energy. For profitability, you need to ask a BSP. As the TSO, I don’t give comments on that.

Tuomas Mattila, Fingrid

I would say that batteries will definitely be part of the solution. It is not a silver bullet. For example, these down-regulation prices, I believe that we also need more down-regulation capabilities for wind or traditional assets, etc. But definitely, batteries, as a very flexible source of flexibility, can be part of the solution.

Henri Taskinen, Capalo AI

Right now, for the revenues, it is not a larger market than the balancing markets. For the total size of the market, I believe it fluctuates hourly in Finland, so it’s from a few hundred megawatts to almost a gigawatt hourly, and roughly from 300MW to 600MW. We believe that the market will grow a lot. When you build renewables and the consumption grows, part of that will always go to the wholesale side, the spot, and the intraday market. Once large portfolios from utilities come to the market, we believe that the liquidity will increase, and that intraday will be one of the most valuable markets in the whole revenue stack in the future.

Henri Taskinen, Capalo AI

The value of the mFRR market has grown drastically since the beginning of March because of this new automated update, the Nordic Energy Activation Market. We see that it is together with the aFRR market and the wholesale one of the most important parts of the revenue stack. Especially right now, as you saw from the bar chart, the down-regulation side of mFRR has been very valuable for the past months in Finland. So, of course, you need to optimize the energy management: how much capacity do you leave there, and how do you manage the energy management strategies during the day to keep the batteries from going full or empty? If you do that well, the mFRR market is a great addition to the revenue stack because you know these extreme prices have happened in the past months. There have been a few thousand euro price spikes, and for example, yesterday, during the night, there was a – 10,000 € price per megawatt hour that continued almost two hours at the mFRR down market. So, these most extreme volatility hours will likely happen in the mFRR market. For the batteries, that is great because you can participate in those, and for the grid operator, that is great because you are helping in the most extreme moments with the battery.

Henri Taskinen, Capalo AI

We see that the amount of co-located / hybrid projects is growing fast across Europe, especially in countries with a high amount of PV installations and projects, such as Spain, Italy, and Poland. Curtailments, government incentives, and grid connection challenges make these co-located BESS projects more needed and attractive for investors and developers.

Henri Taskinen, Capalo AI

Yes, we are going to trade and optimize hybrid projects. The first assets will be commissioned within the upcoming months. 

The main challenge relates to grid code compliance tests, an area in which we are not directly involved. Additionally, the optimization problem becomes more complex in hybrid park trading, which is a challenge from the optimizer’s point of view.

The opportunities involve better balance management, especially now that the imbalance prices have seen very high volatility. There is also potential to enhance capture rates through more traditional energy arbitrage, and to access ancillary markets with the whole hybrid system with respect to the TSO-specific regulatory frameworks.

Henri Taskinen, Capalo AI

Capalo AI currently holds the roles of BRP and BSP in Finland, Sweden, Latvia, and Lithuania, which enables us to operate physical systems in these countries. We will soon announce expansion to some Central Eastern European countries as well. 

Regarding market access beyond a system’s physical location; the spot price is specific to each market area, although prices may converge across regions through market coupling within the broader European market. In the intraday market, order books are shared across the XBID platform, meaning that buy and sell orders from different bidding zones could be matched if cross-border capacity is available. Therefore, BESSs can benefit directly from the price volatility of a different bidding zone, given that cross-border capacity is available.

Henri Taskinen, Capalo AI

After the introduction of the new mFRR EAM, the CM has accounted for 70% of Capalo Zeus VPP’s total mFRR revenues in the Finnish market area.

Henri Taskinen, Capalo AI

For the actual activation we use our in house developed activation forecasts. These forecasts utilize in-house developed power system-specific load forecasts, production forecasts (split into different production sources), and available cross-border capacities. 

In the Nordic markets, the activation price is determined either by the imbalance price when FCR-N is activated, or through accepted aFRR and mFRR energy bids. Since the imbalance price can be forecasted, and prices for aFRR and mFRR activations are determined by our own bids, we can estimate revenues from activations.

Henri Taskinen, Capalo AI

We support the trading of hybrid parks, specifically BESS co-located with wind or PV assets. We will begin trading the latter in the coming months. However, at this stage, we are not considering the optimization or trading of other types of hybrid assets.

Henri Taskinen, Capalo AI

We have not yet participated in the annual FCR procurement, as it has not been as attractive from a pure revenue perspective.

Henri Taskinen, Capalo AI

From the optimizer’s point of view, the most important aspects of battery hardware are availability and cycle constraints. 

The availability matters the most when it comes to revenue generation, as revenues are generated only if you are active in the market. 

Secondly, manufacturers have different warranty terms regarding cycle constraints. Generally speaking, the more the optimizer is allowed to cycle the battery, the more revenue opportunities can be exploited.

Also, DoD and RTE affect the optimization to some degree, but other than that, there are relatively few differentiating factors between battery suppliers from the optimizer’s perspective.