This order, in addition to its size, is very important for two reasons. It indicates that there is sufficient market for electricity storage, and because previous deliveries have been made to the same customer, it shows that customers are satisfied with the deliveries. We are directly on the runway that leads to the optimistic scenario of the Inderes report!
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@Pia_Maljanen ja @Pauli_Lohi juttelivat Meruksesta. 
Merus Power is a Finnish technology company that designs and produces energy storage systems, power quality solutions and related services. In this interview, analyst Pauli Lohi explains what the company does, its peers, growth potential, and its outlook.
Video löytyy Inderes Nordic-kanavalta, siellÀ on myös paljon muitakin kiinnostavia videoita:
https://www.youtube.com/@inderesnordic
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Regarding Merus, one notices that quarterly updates would be needed. The company operates in a rapidly developing field where a lot can happen in half a year. Additionally, the stock is not very liquid (the spread can be 5%), and therefore it doesnât convey information either. Are there any rumors here?!?
Excellent!
The first large energy storage was completed significantly late, and this second one is already on schedule.
Apparently, lessons have been learned from mistakes 
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Quote from Kauppalehti news. This paragraph is significant for many reasons.
Benjamin Kennedy, Managing Director Infrastructure - Renewables at Ardian, states: âThe completion of Mertaniemi is a significant milestone for us, as it is Ardianâs Clean Energy Fundâs first investment in electricity storage in Finland. As the countryâs wind power capacity continues to grow, the need for storage solutions has further increased, which is why electricity storage is a very important factor in maintaining grid stability and improving reliability. We are proud to have brought the solution into operation in 18 months, and we see significant investment opportunities in electricity storage in the Nordics, where we intend to continue building the platform.â
It is no coincidence that the electricity storage is in Lappeenranta, when looking at a map of where Finlandâs wind power plants are located. In addition, the image below shows the locations of Nuclear Power Plants.
Source: https://lehti.seamk.fi/verkkolehti/keskisuuri-tuulivoima-suomessa/
Source: https://fi.wikipedia.org/wiki/Ydinvoima_Suomessa
Eastern Finland is a complete desert in terms of emission-free energy production. Wind power plants are not built on the Eastern border because of Russia. The same applies to Nuclear Power Plants. Furthermore, energy-intensive industry is concentrated in the west and coastal areas. However, Eastern Finland still has settlements that need reliable energy. Transmission connections from West to East are one priority area for Fingrid:
In autumn 2024, Fingrid, together with Eastern Finlandâs distribution network companies, compiled a separate development proposal for the Eastern Finland network. The proposal is based on Fingridâs published transmission network development plan, the distribution network companiesâ own development plans, and separate plans made based on potential customer needs. The main message of the proposal is that there is ample space in Eastern Finlandâs electricity grid for new production and consumption projects, and that the electricity grid will be developed based on customer needs in cooperation with regional distribution network companies and industry operators.
Furthermore, a large amount of variable renewable energy production requires balancing elements, because the wind doesnât always blow, nor does the sun always shine. The electricity grid can be very vulnerable to disturbances â whether intentional or caused by natural phenomena â and securing electricity supply during disruptions is more important today than ever. Society descends into chaos very quickly when electricity stops flowing from the socket.
For example, the blackout seen in Spain and Portugal a few weeks ago was apparently caused by natural phenomena, but partly also because the countryâs electricity grid was not prepared for such a disturbance, causing a domino effect. Large fluctuations in electricity demand in different places brought down the grid.
A rare and powerful atmospheric phenomenon has been blamed for the massive blackout that plunged large parts of Spain, Portugal and even parts of southern France into darkness on Monday (April 28). The unprecedented outage disrupted daily life for over 50 million people across the Iberian Peninsula, halting subways, grounding flights, severing phone lines and knocking out traffic lights and ATM machines.
According to Portugalâs electricity grid operator REN, the incident was triggered by âanomalous oscillationsâ in very high-voltage lines, caused by extreme temperature variations in Spain. This rare event, known as an âinduced atmospheric variation,â led to synchronisation failures across the interconnected European electricity network, causing successive disturbances and widespread outages.
The growth of variable renewable energy sources in Europe places significant demands not only on the transmission grid, but local solutions can also help in smaller or larger problem situations.
Where Elisa offers Home Battery to households, Merus can offer local storage solutions for unforeseen disruptions and even ensure power supply for a private entity â or why not a public one? â that has prepared with its own electricity storage, at least for some time. Enough decentralized solutions of this kind will increase the resilience of society and businesses and ensure the functioning of society during difficult times.
What might be the prospects for nationally important actors in terms of security of supply to acquire similar solutions? Isnât domesticity an asset in such uncertain times? 
I see a bright future for Merusâs business. Itâs the right company, in the right place, at the right time. It stays in the portfolio. Perhaps Iâll add more.
ps. This is not investment advice. I also invested in Hyzon. And Plug Power. 
Read at your own risk.
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Here are Pauliâs latest comments on Merus and its news. 
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@Pauli_Lohi How do you see Merusâs cash flow from the service business developing in the coming years after these significant Battery projects? The share of the service side will surely increase.
What kind of pricing models does Merus have for the service side?
Thatâs not how it is.
There are completely other reasons behind Lappeenrantaâs location than the location of wind power; with that logic, the battery should be next to the wind power.
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The share of service business in our forecasts is 3-4% of total revenue in the coming years. The share is low, and I donât currently consider it a very significant driver in the income statement. It is, of course, moderately positive for profitability if and when service revenue starts to cover the costs related to their development and production in the near future. Services also have a strategic role in making Merus Powerâs comprehensive energy storage solutions more attractive to the customer, based on a one-stop-shop principle.
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Merus also offers an optimization service in addition to its batteries, with which it optimizes the operation of its batteries in the reserve markets and brings the batteries to the reserve markets.
Industry players (working for a competitor) typically offer that service mainly with a profit-sharing model. Of course, there are company-specific differences here, and itâs harder to negotiate in larger contracts. But this is the so-called industry standard.
Do you have information about Merusâs billing principles or what these cash flows might be like? I consider the estimates for the service businessâs share pessimistic. And if I am right, this is not taken into account in the forecasts.
I donât believe that Merusâ pre-22-23 batteries have that profit sharing. But I think itâs included in all 23-25 battery projects made (started).
The biggest ones are a good question, and their profit sharing % can also be different. But even those are not yet gigantic on Finlandâs scale.
I can certainly elaborate more on that activity in these markets if interested.
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I disagree with this. Wind power (as well as hydropower) is built where it is possible to produce it. Electricity storage, on the other hand, should be built as close as possible to the point of use, not the point of production. Today, a lot of energy is transferred from West to East precisely because it is not produced enough in the East. There would certainly be a desire to build wind power in the East, but for reasons known to all, this has not been done. Local electricity storage can be the second-best solution to ensure electricity supply if local production cannot be secured.
In this case, it makes sense to build storage specifically near the point of use, which is far from production, and to charge the storage when electricity is cheap and the gridâs transmission capacity is sufficient. In addition, it creates resilience in a situation where, for example, there would be transmission problems in the main grid.
It would be great if every area with a certain population had its own electricity storage, which would be sufficient to cover the areaâs needs for a few hours, even if all transmission connections from the area to the production site were cut. In addition, such storages can balance the grid in situations where there is an unusually high demand in one place. For example, now Suviseurat or a Matti and Teppo concert in some small rural municipality.
Edit: It would be great if some power grid engineer could tell us more about these things. I am not one myself.
I am not an electrical grid engineer. But I calculate battery profitability, optimize their operation, etc., for a living, so itâs closely related.
- The assumption that the battery would be used in the energy market is incorrect. Batteries are primarily for FCR and FFR use. These are low-energy frequency markets that are nationwide in Finland.
In other words, to put it bluntly, location doesnât matter; adjustments are made based on the grid frequency, which is the same throughout Finland.
More restrictions are caused by transformers that are capable of accommodating batteries.
That specific use case is indicated, for example, by the Power-to-Energy ratio, which I believe was 1.
That battery energy, what was it, 30 MWh? It would last about 5 minutes, if even that, for the consumption of any larger city.
Fingrid can use the battery for special adjustments where location matters, but Merusâs batteries are not in the mFRR market where these special adjustments would be implemented.
Even in this case, the division on the energy side is made into only 3 parts.
South - Central - North, even though Fingrid could, in principle, activate them based on location. So, these batteries are not in such a market.
It is not primarily profitable for them. The cost per cycle is too high.
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As I understand it, the electricity storage facility supplied by Merus is precisely intended for improving the reliability and stability of electricity supply in such situations. So, at least according to Ardian itself, it is, and they have probably calculated it to be profitable. Perhaps its location in Lappeenranta has nothing to do with the fact that a large part of renewable electricity is produced in Western Finland, and they could have built it elsewhere?
Benjamin Kennedy, Managing Director Infrastructure - Renewables at Ardian, states: "The completion of Mertaniemi is a significant milestone for us, as it is Ardianâs Clean Energy Fundâs first investment in electricity storage in Finland. As the countryâs wind power capacity continues to grow, the need for storage solutions has increased even further, which is why electricity storage is a very important factor in maintaining grid stability and improving reliability.
And even if that electricity storage might only last 5 minutes in Turku or Helsinki, in Lappeenranta, according to the news, it lasts about 2 hours. Based on the article, it also appears to be ready for rapid responses when the grid frequency demands it.
The 38-megawatt output corresponds to the production capacity of a small power plant, and the nominal capacity of 43 megawatt-hours would be enough to cover the electricity consumption of over 35,000 households, or a city the size of Lappeenranta, for two hours. One of the most important features of the electricity storage is its ability to react to grid needs in fractions of a second. Precisely this kind of flexibility is crucial for maintaining stability in Finlandâs electricity grid.
It is, of course, possible that I am completely missing your point. Additionally, that press release might be purely promotional, not necessarily stating the precise use/purpose of that specific electricity storage, but rather general things that can be done with electricity storage. You certainly know these things much better due to your work, but as an investor in Merus, I also want to try to understand if such large electricity storage facilities are sensible for grid stability and ensuring electricity supply, for example, in Eastern Finland. Based on that news, the Lappeenranta electricity storage facility seems to be exactly that.
And even if, based on grid frequency, it would be the same where the batteries are located from the gridâs perspective, their location is indeed significant for electricity availability in exceptional situations. An electricity storage facility located in Ostrobothnia does not help Lappeenranta if transmission connections to Lappeenranta are cut off.
To this, I will also include Elisaâs Home Battery (Kotiakku), where consumers can get Elisaâs battery for their homes, into which energy is then stored or taken by Elisa as needed by the grid, centrally managed according to the current needs of the grid. I donât know about its profitability for consumers, but I understand the idea of distributed generation when there is, for example, an electricity shortage in some area of the grid. If there are tens of thousands of such households, it can have a significant overall impact.
@Glarin, how do you see this Ardian acquisition? Is it realistic to think that other cities or public entities could acquire similar electricity storage facilities, and if so, on what basis should such an acquisition be made?
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Public entities will not be acquiring these batteries.
This âimproving reliability and stabilityâ that is talked about in these cases is grid frequency support. That is exactly what I was talking about. That is, support for Fingridâs frequency market.
This is an operation done purely with cash flow and market activity in mind.
It is paid for, and thatâs why itâs done.
It does not enable âisland mode operationâ which you talk about as being able to prevent local power outages.
For that, the operation would have to be different and in different markets. Merus does not participate in these markets.
âAn electricity storage facility located in Ostrobothnia does not help Lappeenranta if the transmission connections to Lappeenranta are cut off.â
â Not this either, because this does not participate in such markets.
The same thing with Elisaâs battery. Of course, Elisaâs battery protects the consumer.
The techno-economic reasons for purchasing these battery systems are very different from what you imagine.
In addition, batteries are currently placed especially in connection with, for example, wind power.
Of course, they are also beneficial in consumption.
Elisaâs battery and Optimization are also familiar.
But even that does not create the functionality for the grid that you think it creates.
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The solutions you are talking about would require transfer management. Transfer management is not done in Fingridâs FCR markets.
For transfer management, there is the mFRR market and ID which Fingrid uses as support. Merus does not participate in the mFRR market with batteries.
And I donât believe it will participate because the cycle cost is too high.
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Thanks for @Glarinâs clarifications. That announcement now seems misleading to me on this basis regarding the â2-hour capacity for Lappeenrantaâ part. Perhaps it was an attempt to illustrate the capacity of the electricity storage, but if it doesnât then provide âelectricity to consumers after a hurricaneâ, that wasnât stated in the article, and as a layman, I took it at face value. Luckily, there are guys on the forum who know how things really are.
I checked the term mFFR and it indeed refers to balancing markets, which means continuous electricity production in a way that allows you to sell it, for example, to Nordpool. Now I (probably) understand that no existing battery storage can achieve that, but it must be produced somehow at the moment of consumption.
This is how one learns something new almost every day.
ps. That said, I still see an excellent future for Merus with these electricity storages used for frequency regulation, as the increasing amount of variable renewable energy sources brings more of these regulation needs. (@Glarin, please donât shoot this idea down ).
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In theory, an energy storage system is capable. That operation is just not profitable at current prices. Which is why Merus doesnât do it.
The matter is a bit more complex and broader in reality, of course, but one could write a masterâs thesis on the operation of the subject and still not be completely finished.
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Merus Power has signed an agreement with the Egyptian Suez Steel Company for the modernization of a steel millâs static reactive power compensator. This is already the second cooperation project between the companies, strengthening their partnership. Merus Powerâs share of the agreement is approximately one million euros. The modernization will be carried out in early 2026 in cooperation with local partner, ETA Electric.
Suez Steel Company is a significant Egyptian steel industry player that invests in solutions for production efficiency and sustainable development.
During the modernization, the most critical components of Suez Steel Companyâs large static reactive power compensator, which maintains the stability of the electrical grid, will be replaced. Instead, large passive components can be retained, enabling a cost-effective and environmentally friendly solution. This modernization model ensures the optimal continued operation of the plantâs metal melting furnace compensator, without unnecessary downtime, and the modernization occurs significantly faster than replacing the entire compensator.
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Regarding Merus:
At the Reserve Market Days (FG invitation event), Finnish battery operators, e.g., Cactos, talked about how approximately 2000 MW of batteries are coming to Finland in the coming years. This amount is quite staggering, and the FCR market will become saturated.
Gradually, a shift will also occur towards the energy side and the aFRR + mFRR markets.
DSO level batteries will also become more common, with which a kind of transmission management is performed. However, this is mainly about peak shaving, and not so much security of supply.
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