Few of us realize that maintaining the stability of the electric grid requires careful planning and real-time adjustment. This post explains how Polar Night Energy’s Sand Battery can help with grid balancing and make profit by accessing the grid balancing markets. In our simple case study the final heat price is -94 e/MWh after the profits from balancing markets – yes, you make money by producing heat!

Graph 1. Profits from aFRR markets during the assessed period from August 16 to September 15. The profit is the historical hourly market price (EUR/MW) times the capacity 2 MW.

The production and consumption of electricity must meet at all times to maintain the 50 Hz frequency of the electricity grid. This is mainly achieved by careful planning. In case of a deviation of production and consumption of electricity due to, for instance, un unplanned powerplant outage or inaccurate weather forecast, grid balancing services are needed.

In many countries, especially in EU, grid balancing services are procured from open markets that are managed by the local transmission system operator, for example Fingrid in Finland. Any entity with flexible electricity production or consumption fulfilling certain technical requirements, like our Sand Battery, can participate in these markets and serve as a reserve.

Reserve Products

Fingrid maintains several reserve products for different purposes. Frequency Containment Reserves (FCR), are constantly controlling the grid frequency. Frequency Restoration Reserves (FRR) are used to return the grid frequency to the nominal value 50 Hz and free the activated Frequency Containment Reserves in case of frequency deviation. Table 1 summarizes all the automatic reserve products maintained by Fingrid.

In Table 1, the direction of regulation is understood from the electric grid point of view. Upregulation aims to increase the grid frequency, which a reserve does by increasing production or reducing consumption. Downregulation respectively decreases the grid frequency by decreasing production or increasing consumption. For FCR-N, which is a symmetric product, the reserve must be capable to regulate in both directions.

Table 1. Summary of the automatic reserve products maintained by Fingrid.

  
      Reserve Product
      Explanation
      Direction of regulation
      Frequency bandwidth (Hz)
    

  
      FCR-N
      Frequency Containment Reserve for Normal Operation
      Symmetric
      49.9–50.1
    

      FCR-D up
      Frequency Containment Reserve for Disturbances
      Up
      < 49.9
    

      FCR-D down
      Frequency Containment Reserve for Disturbances
      Down
      > 50.1
    

      FFR
      Fast Frequency Reserve, addresses lack of inertia in the electricity system
      Up
      < 49.5
    

      aFRR up
      Automatic Frequency Restoration Reserve
      Up
      Activation controlled by Fingrid
    

      aFRR down
      Automatic Frequency Restoration Reserve
      Down
      Activation controlled by Fingrid
    

Sand Battery as Reserve

The Polar Night Energy’s Sand Battery is charged via electric resistors, and the energy is stored as heat. Hence, the Sand Battery is a flexible electricity consumer. Table 2 explains how the Sand Battery can operate in different markets.

Table 2. Sand Battery's operation as reserve.

  
      Direction of regulation
      Sand Battery operation
    
      Up
      The Sand Battery charges. If the reserve is activated, charging is stopped (decrease consumption).
    
      Down
      The Sand Battery does not charge. If the reserve is activated, charging is initiated (increase consumption).
    
      Symmetric
      The Sand Battery charging is set to half power. The charging is reduced or increased according to the grid's frequency (adjust consumption).

Attending to different grid balancing markets allows the Sand Battery to gain extra profits while optimizing the behaviour based on spot prices and the user’s heating demand.

Potential Income from Reserve Markets

All the reserve products described above are balancing capacity markets. That is, a market attendant gets compensation for readiness to balancing, irrespective of whether the reserve is activated. Let’s assume we have a Sand Battery with 2 MW charging power, and we want to attend the FCR-D down market. This is how it works:

1. The Sand Battery operator sends reserving capacity bids for the following day. A single bid could look like this:

Market: FCR-D down
Time period: 15:00 – 16:00
Capacity: 2 MW
Price: 30 EUR/MW

2. Fingrid sorts all the received bids from cheapest to the most expensive. Fingrid accepts bids starting from the cheapest until the required capacity is procured. Every reserve whose bid gets accepted is paid according to the most expensive accepted bid (this is called Marginal pricing).

3. Assume the most expensive accepted bid is 50 EUR/MW. That means that the Sand Battery operator’s bid was accepted, and they get 50 EUR/MW * 2 MW = 100 EUR compensation.

4. At 15:00 the following day, the Sand Battery sets charging power to zero and starts to follow the grid frequency. If the frequency rises above 50.1 Hz, the Sand Battery starts charging and helps to restore the frequency below 50.1 Hz.

Simple Case Study

In our previous blog post we presented a simple case study for a spa with 2 MW Sand Battery and constant 500 kW heat demand. We argued that the Sand Battery should be charging 25% of hours to produce the needed 360 MWh of heat. By allocating the charging to cheapest hours, we ended up with 4 200 e charging costs and 11 e/MWh final heat price.

What if the Sand Battery would have in addition accessed the grid balancing markets?

Let’s assume that the Sand Battery operator would have bidden to aFRR up and down markets during the assessed period 16/8/2023 – 15/9/2023. Following the logic explained in Table 2, for the charging hours they would bid the 2 MW resistor capacity to aFRR up market. The rest of the time they bid 2 MW capacity to aFRR down. In this way, acting as reserve would not disturb the optimal charging pattern.

Assume for simplicity that all the bids were accepted. This would be the case with constant bid size 0 EUR/MWh, assuming the relatively small bid capacity would not change the market dynamics. Due to marginal pricing, the income from each hour would have been the historical market price for the hour (X EUR/MW) times the bidden capacity 2 MW. The hourly profits are illustrated in Graph 1.

The outcome?

  
      Profits from aFRR up:
      9,000 EUR
    
      Profits from aFRR down:
      29,000 EUR
    
      Total aFRR profits:
      38,000 EUR
    
      Charging costs:
      4,200 EUR
    
      Final costs:
      -33,800 EUR
    
      Price for produced heat:
      -94 EUR/MWh

The profits from aFRR markets were enough to cover the charging costs, with a nice margin! Yes, that would mean that you make money by producing heat.

Text: Terhi Moisala, Data Scientist

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This article was conducted under the project NewSETS – New energy storages promoting sustainable energy transition in societies.

This project has received funding in the framework of the joint programming initiative ERA-Net Smart Energy Systems’ focus initiatives Smart Grids Plus and Integrated, Regional Energy Systems, with support from the European Union’s Horizon 2020 research and innovation programme under grant agreements No 646039 and 775970.

The content and views expressed in this material are those of the authors and do not necessarily reflect the views or opinion of the ERA-Net SES initiative. Any reference given does not necessarily imply the endorsement by ERA-Net SES.