The multinational electricity market in the Nordic and Baltic countries in Europe is anticipated to satisfy the large electricity demand growth in the area through significant increases in the generation capacity of weather-dependent electricity production, i.e., wind and solar power. This trend is associated with an increased demand for balancing services due to increasing forecast errors resulting from the growing capacity of wind and solar power. This study models and optimizes two stages of electricity market operations in the area for 2030, including day-ahead market commitments and imbalance management due to wind and solar power forecast errors. The model considers generating assets, hourly demand data, and interconnections. The study found that hydropower, demand side response, and battery energy storage play the most prominent role in balancing forecast errors. The study also identifies two distinct areas in the system; hydropower-rich areas with an abundance of balancing resources and other areas which will have a scarcity of balancing resources. Moreover, the study analyzed the sensitivity of balancing power prices related to the installed battery energy storage capacity in different areas of the system. The study identified differences between areas regarding how battery storage capacities affect balancing power prices, and hence the profitability of battery energy storage.
Seppälä et al. (Mon,) studied this question.