Ancillary Services

System operator needs to consider the laws of physics. It needs a coordination in dispatch and adopting preventive measures. At gate closure, the
responsibility for generation scheduling and dispatching is transferred to the System Operator to guarantee:
 Quality: voltage and frequency within acceptable margins
 Security: non-interruption of supply in the short-term
 Efficiency of supply: guarantee lowest possible cost

1. Including constraints to clear the market and redispatching accordingly.

When energy markets are decoupled from network and security constraints, results might not be efficient: energy prices should reflect the effect of
reliability constraints. Some systems use an iterative process to minimize this inefficiency.

2. Procure ancillary services: products and services acquired by the system operator to ensure security and quality.
Operating reserves: real power capability that can be given or taking in the operating timeframe to assist in frequency control, voltage regulation, etc.
Typical EU classification:
 Frequency control - balance of demand and generation: primary, secondary and tertiary reserves
Short-term imbalances can be caused by errors in demand or wind production forecasting or the forced outage of a thermal unit. When these
things happen, the stability of the system is at stake and there is very little time to react. It is unlikely that SO would leave this to the market.
Reserves are used.
 FCR or primary regulation: automatic, local and provided by turbine speed regulators. It sustains frequency levels and responds in
seconds. They can be obtained by commercial means (Germany, Poland, Sweden, Denmark) or as a mandatory obligation, paid
(Fance, UK) or not paid (Spain).
 FRR or secondary regulation: automatic, regional regulation provided by Automatic Generation Control (AGC). SO sends signals to
certain generators (flexible enough) and restores frequency and primary reserve. 5-15 min. It is generally a commercial service,
except in France, were it is mandatory for generators exceeding a certain size. It takes place before DA market to avoid all flexible
units to be cleared in the DA market.
 RR or tertiary regulation: manual, regional regulation. Attempts to restore the secondary reserve capacity by recovering the
minimum operating cost status of the system. Managed through ad-hoc markets operated by TSOs where generators submit bids
to increase or decrease their output (RT and balancing markets)
 Voltage regulation – reactive power
 Black-star capabilities – restoration of power, the ability of a generating unit to start up and deliver power without external assiatance from
the power system.

Product definition best practices:

 Define innovative product to unlock new flexible resources
 Separate the procurement of balancing capacity and balancing energy - they are different products as they have different costs –
 Design two separate products for upward and downward reserve
 Avoid discrimination.

Acquisition process best practices:

 Reserves scarcity should affect the energy price. Reserve price should reveal the true value of demand curtailment. If not, right price signals
are not being sent.

Reserves cost-allocation:
 Demand pays reserves cost based on imbalances or not
 Demand and generation pay, based on imbalances, wrt gate closure or wrt other markets (ex. DA)

3. Gate closure and real-time balancing

Balancing markets: their purpose is to provide ST operational security of supply from a market approach, in order to encourage market participants to
manage their exposure to imbalance and minimize balancing costs. They take place in real-time and it is where reserves are used.

Balancing responsible party (BRP): imbalances are measured and settled at different aggregation levels. In the EU, imbalances are measured and
charged to BRPs (zonas de regulación). Market participants in a BRP can net their imbalances and only pay penalties for the net imbalance.

Imbalance pricing
 Single imbalance pricing (US; Germany): imbalances are settled at balancing energy cost. The price that a BRP pays if it is short is the same as the
price it receives if it is long. It gives real time incentives to help the system.
 Dual imbalance pricing (Most EU systems): the price that the BRP receives/pays when helping the system is not the balancing energy price but rather
a less advantageous one. It gives incentives to avoid deviations but kills the incentives to help the system.