Nordic balancing reform: How day-ahead to imbalance spreads evolved by bidding zone

In March 2025, the four Nordic TSOs introduced the automated Nordic mFRR Energy Activation Market (mFRR EAM). This is a deliberate redesign of how the Nordics price balancing energy, a reform tied closely to two cross-border accessions: PICASSO (aFRR) and MARI (mFRR). Denmark joined the European aFRR platform PICASSO in October 2024, followed by Finland in March 2025; Sweden and Norway are not expected to join until 2028. MARI accession is targeted as a joint Q1 2027 milestone for the whole region.

Nordic day-ahead to imbalance spreads rose sharply from early 2025 as a result. Eastern Denmark (DK2), Western Denmark (DK1), and Finland now lead the region at roughly 66, 56, and 55 EUR/MWh, respectively; DK2 peaked near 84 EUR/MWh before starting to compress.

In this article, we take a closer look at the Nordic balancing reform and explain why we expect the current direction to reverse in 2027.

Recent changes in the Nordic balancing markets

Before 4 March 2025, Nordic imbalance price equaled the Manual Frequency Restoration Reserve (mFRR) activation price. Hydro dominated a cheap, stable merit order, shared cross-border bids dampened local spikes, and 60-minute settlement averaged out intra-hour deviations. With mostly neutral imbalance settlement periods (ISPs), price rarely moved.

That day, Fingrid, Svenska kraftnät, Statnett, and Energinet introduced four simultaneous changes:

• mFRR shifted from manual dispatch to the mFRR EAM, an automated clearing mechanism. TSO operators previously had discretion to skip disproportionate bids or leave prices at spot when no clear direction existed. The algorithm now activates mechanically, so nearly every interval has a dominating direction.
• Settlement moved from 60-minute to 15-minute intervals. Intra-hour deviations no longer average out; instead, each quarter-hour settles independently.
• A new pricing rule in Denmark and Finland, where PICASSO is already live. The imbalance price is now the max or min of the mFRR price and the volume-weighted aFRR price. Sweden and Norway remain on mFRR-only pricing until their own PICASSO entry.
• Prior to mFRR EAM, the Nordic TSOs shared all mFRR bids in a common merit order list. With the current implementation of mFRR EAM, only Scheduled Activations (SA) can be performed cross-border while Direct Activations (DA) are limited to local bids within each bidding zone.

For regions with multiple smaller, well-connected bidding zones, like the Nordics, the consequences of these reforms are likely more visible than elsewhere in Europe. Nordenergi, the joint body representing the Nordic energy industry associations, flagged this issue as well. Let’s take a closer look.

Different impact across bidding zones

The effects of the Nordic balancing reform on imbalance prices differ sharply by bidding zone. Nordenergi noted that a forecasted imbalance of just 1 MW in DK2 was once enough to raise the imbalance price by more than €350/MWh, with almost no bearing on the actual physical balance of the power system.

This price sensitivity is a consequence of the local-activation rule. Since Direct Activations are now mostly confined to local bids, the size of a zone’s flexible resource pool matters far more than before.

All Nordic zones

The chart below shows this split across all Nordic bidding zones since the mFRR EAM went live in March 2025. Small, wind-heavy zones with thin local order books (DK2 and SE4) see far more volatility than zones sitting on deep hydro reserves such as SE1, SE2 and the Norwegian zones (NO1-NO5).

Denmark, Sweden, Norway

With the above considered, it’s no surprise that DK2 shows the steepest rise in day-ahead-to-imbalance spreads of any Nordic zone, nearly tripling from ~25 to a peak of ~78 EUR/MWh.

Sweden shows the same pattern on a smaller scale. SE4 and SE3 (higher wind exposure, less local flex) rose to 39–52 EUR/MWh, while SE1 and SE2 (better hydro access, deeper local liquidity) stayed closer to 23–25 EUR/MWh.

Norway sits at the other end. NO1, NO2, NO4, and NO5 held at 8–16 EUR/MWh throughout, as deep hydro keeps the local merit order cheap even under the new rules.

NO3 stands out due to a transmission bottleneck zone with “counterintuitive” flow patterns since flow-based coupling launched in October 2024. Its spread rose the most of any Norwegian zone, from the lowest to the highest in the country, ~7 to ~18 EUR/MWh (+156%). Hydro reserves sit elsewhere in Norway, but the local-only Direct Activation rule leaves NO3 drawing on its own thin pool when isolated by grid constraints. This could be a Nordic-scale preview of the risk MARI could reintroduce at the European scale.

A closer look at Finland

Finland is the only wind-exposed zone that has already refined its pricing mechanism, moving from a formula vulnerable to extreme mFRR bids toward a volume-weighted blend. It’s the closest indicator of what compression could look like once MARI adds a deeper cross-border mFRR pool on top of it.

Finland’s 12-month rolling spread stood at ~38 EUR/MWh in February 2025, just before the mFRR EAM. The EAM change then drove a sharp inflection, peaking at ~72 EUR/MWh in February 2026.

On 1 June 2026, Fingrid replaced the old max/min rule with a volume-weighted blend of mFRR and aFRR prices, stopping a single extreme bid from setting the price for the whole interval. For example, a 100 MWh interval clearing at 50 EUR/MWh with one bid at 500 EUR/MWh used to settle at 500 EUR/MWh; under the new blend, it settles closer to 133 EUR/MWh

The effect is already visible: the spread has fallen to ~52 EUR/MWh by July 2026, down 15% from its peak, though still 37% above pre-EAM levels.

Expectations for Q1 2027

The Baltics offer the closest precedent of MARI’s impact. Since joining the platform in October 2024, their balancing prices have repeatedly hit ±10,000 EUR/MWh. Shallow local mFRR pools meant a modest 20–30 MW Direct Activation could cause extreme spike prices. That’s similar to what we observed in DK2 and SE4 in the above section.

The question for 2027: does MARI fix that mechanism? MARI’s shared merit order covers Scheduled Activations. Direct Activations, the reactive layer behind DK2’s and SE4’s sharpest spikes, currently stay local. Whether MARI extends cross-border access there too is unresolved. We consider two scenarios:

Compression case. A larger, shared European mFRR pool means more liquidity behind every activation: cheaper, deeper competition to meet a given imbalance, which dampens the extreme prices driven by thin local order books today. This is strongest if MARI’s coverage extends to both Direct and Scheduled Activations, since that’s where DK2 and SE4’s sharpest spikes originate. Still, this depends on interconnector headroom for balancing after the day-ahead optimization is done. Finland is already compressing, having dropped its max/min rule in June 2026.

Congestion case. MARI covers Scheduled Activations only; Direct Activations remain local, as they are today. DK2 and SE4’s extreme events continue. Physical limits compound this – Baltic Cable capped at 600 MW, Fenno-Skan derated to 400–800 MW – and NO3 already shows the same pattern domestically. Political risk adds to it: Sweden halted a planned Konti-Skan upgrade to Denmark in May 2026 over an EU revenue dispute.

Imbalance exposure for short-term traders

For short-term traders and asset operators in DK1, DK2, Finland, and southern Sweden, imbalance exposure has become larger and harder to predict. This is where accurate power forecasting earns its keep by narrowing the gap between expected and actual generation before it becomes an imbalance cost.

We’ll keep tracking how imbalance prices play out ahead of PICASSO and MARI entry in 2027. If you’re trading or managing assets in DK1, DK2, Finland, or southern Sweden, contact us to discuss how our power and price forecasts cover your portfolio. For our previous coverage of European balancing reform, see the related reads below.