Ancillary Service Management and their uses

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1. Ancillary Service Management

2. Introduction Ancillary services in the energy industry refer to services that support the reliability and stability of the electricity grid. They are essential for maintaining the balance between electricity supply and demand, managing grid frequency, voltage levels, and addressing imbalances or disruptions. Types of Ancillary Services Frequency Regulation Spinning Reserve Non-Spinning Reserve Voltage Support Black Start

3. Frequency Regulation : Maintains grid frequency at a set level (typically 50 or 60 Hz) by balancing supply and demand in real-time. Frequency regulation services respond quickly to fluctuations in demand or supply, helping stabilize the grid . Spinning Reserve : This involves generators that are already running at part capacity and can quickly increase output if needed, typically within a few minutes. These reserves are essential in handling sudden disruptions, like an unexpected generator outage. Non-Spinning Reserve : Similar to spinning reserves but involves standby generators that are not currently online. They take longer to activate (usually 10-30 minutes) and are used for longer-duration disruptions where spinning reserves may not be sufficient. Voltage Support : Maintains voltage levels across the grid by providing reactive power. This is critical for reducing power losses and ensuring consistent delivery of electricity, especially over long distances. Black Start : The ability of a power station to start up without an external power source, enabling it to support the restoration of the grid in the event of a blackout. Black start capabilities are often provided by hydroelectric plants, batteries, or other systems capable of autonomous startup.

4. Start Capability in Ancillary Services Start capability refers to the ability of a generation source or storage system to come online quickly when needed, an essential feature for some types of ancillary services: Fast-Start Capability : Services like frequency regulation and spinning reserves rely on fast-start capability. These resources must come online within seconds to minutes in response to grid fluctuations. Delayed Start Capability : Non-spinning reserves and black start services often do not require as rapid a response and can come online within a more extended period, typically 10 to 30 minutes.

5. Provisions of ancillary services in India The Central Electricity Regulatory Commission (CERC) oversees the regulatory framework for ancillary services, while entities like the Power System Operation Corporation (POSOCO) and the National Load Dispatch Centre (NLDC) are responsible for their implementation. 1. Regulatory Framework Central Electricity Regulatory Commission (CERC) : CERC issued the Ancillary Services Operations Regulations in 2015, setting the foundation for managing grid stability through ancillary services. National Load Dispatch Centre (NLDC) and Regional Load Dispatch Centers (RLDCs) : These centers are responsible for monitoring, managing, and coordinating ancillary services across India’s regional grids. 2. Types of Ancillary Services in India Frequency Control and Regulation : Essential for maintaining India’s national grid frequency at 50 Hz. Services include Primary, Secondary, and Tertiary Reserves :

6. Primary Frequency Response (PFR): Activated automatically by generating units to manage sudden frequency changes. Secondary Reserve (Automatic Generation Control or AGC): Managed by NLDC and RLDCs to adjust generation in real-time through automatic generation control. Tertiary Reserve (Manual Reserve): Activated manually, usually through instructions from RLDCs to restore and maintain frequency. Reserve Regulation Ancillary Services (RRAS) : Introduced under CERC’s 2015 Ancillary Services Operations Regulations , the RRAS includes both upward (increase in generation) and downward (decrease in generation) regulation to meet short-term demand and supply imbalances. Spinning and Non-Spinning Reserves : Spinning Reserves : Generators operating at part capacity can quickly ramp up output in response to grid fluctuations. Non-Spinning Reserves : Involves standby units that can come online within 10-15 minutes, offering additional backup.

7. Fast Response Ancillary Services (FRAS) : Provide rapid response services primarily from battery storage, pump storage, and flexible generating units. FRAS ensures stability during demand spikes and renewable energy variability Voltage Control Ancillary Services : Maintains stable voltage levels across the grid, especially important for long-distance transmission. Managed through reactive power management and voltage control devices like capacitor banks, reactors, and flexible AC transmission systems (FACTS). Black Start Capability : Enables certain power stations, typically hydro or battery storage units, to restart independently after a major blackout. CERC mandates certain generating stations to maintain black start capabilities as part of the grid restoration process. 3. Renewable Energy Integration Renewable Energy Management Centres (REMCs) : Special centers set up to manage the variability of renewable energy sources. REMCs work with NLDC and RLDCs to coordinate wind and solar power forecasting, scheduling, and dispatch.

8. 4. Market-Based Ancillary Services (MBAS) Proposed under CERC guidelines, MBAS aims to implement market-driven ancillary services, allowing power generators to participate in ancillary services on a competitive basis. This would bring down costs, improve service quality, and ensure fair compensation for providers. 5. Incentives and Compensation CERC has established a compensation mechanism for providers of ancillary services, with payments structured based on the type and timing of the service. Additional incentives are provided to encourage fast-response and renewable-based ancillary services, supporting a flexible and cleaner grid.

9. Co-Optimization of Energy and Reserve Services Co-optimization of energy and reserve services is the simultaneous optimization of electricity generation (energy) and ancillary services (reserves) to achieve efficient and reliable grid operation. By co-optimizing, grid operators can minimize total costs and make the best use of available resources. Key Components of Co-Optimization Integrated Resource Scheduling : Co-optimization jointly allocates resources for both energy generation and reserves, considering constraints such as generator capacities, ramp rates, and fuel costs. Cost Minimization : By evaluating trade-offs, co-optimization minimizes system-wide costs by using resources that are capable of providing both energy and reserves cost-effectively. System Reliability : Ensures that reserve requirements are met along with energy demand, reducing the risk of power disruptions and maintaining frequency stability.

10. Loss of opportunity cost in ancillary services The loss of opportunity cost in ancillary services refers to the foregone revenue that a generator could have earned if it were providing energy to the grid instead of dedicating capacity to ancillary services. This opportunity cost is an important consideration for both grid operators and generators, as it impacts the financial capability of participating in ancillary services like reserves, frequency regulation, and voltage control . When a generator is selected to provide ancillary services, such as spinning reserves or frequency regulation, it may need to reduce its energy output or keep additional capacity on standby. The opportunity cost here is the difference between the revenue that could have been earned by selling energy and the compensation received for providing ancillary services . For Example: A generator providing reserves might need to stay idle or at partial load to ramp up quickly when needed. This means it’s not fully capitalizing on selling energy in the spot market and, instead, incurs a loss of opportunity cost. A flexible resource, like a battery , used for frequency regulation might be restricted from charging or discharging fully, missing out on potential profits from trading energy in times of high demand.

11. Components of Opportunity Cost Energy Market Revenue : The primary revenue that a generator could have earned by selling energy directly to the market. This value depends on real-time market prices and demand. Ancillary Service Compensation : The payment a generator receives for participating in ancillary services, which might be lower than what could be earned by generating and selling energy. Additional Operational Constraints : Certain resources might incur wear-and-tear costs or fuel costs due to frequent ramping, further adding to the opportunity cost.

12. Factors Influencing Opportunity Costs in Ancillary Services Market Price Volatility : High energy prices increase the opportunity cost for a generator participating in ancillary services, as the forgone energy revenue becomes more significant. Ancillary Service Demand : In markets where ancillary services are highly valued or scarce, compensation for these services may offset the opportunity cost, making it worthwhile for resources to participate. Resource Flexibility : Resources with fast ramping capabilities, like batteries, can switch between energy and ancillary services more easily, potentially lowering opportunity costs. Regulatory and Market Structure : Market rules that provide adequate compensation for ancillary services or allow co-optimization (simultaneous scheduling of energy and reserves) can help reduce opportunity costs.

13. Minimizing Opportunity Costs Through Co-Optimization Co-optimization of energy and ancillary services is a powerful approach that allows the grid operator to simultaneously optimize both markets. By taking into account the opportunity costs in real-time, co-optimization allocates resources in a way that minimizes total costs across energy and ancillary services. For example, a generator can be partly dispatched for energy and partly reserved for ancillary services in a way that maximizes its revenue potential and ensures the grid's stability. This method not only lowers opportunity costs but also provides a more cost-effective and reliable power system . Impact of Opportunity Costs on Ancillary Service Participation If ancillary service compensation is insufficient to cover opportunity costs, generators may be reluctant to participate, leading to a shortage of reserves and impacting grid reliability. Therefore, fair compensation mechanisms, possibly based on market-clearing prices or dynamic pricing, are necessary to ensure an adequate supply of ancillary services.

14. International practices The restructuring process of the electric supply industry (ESI) began in 1989 in order to reduce the government intervention in the economy, and total liberalization was reached in 1991. It was known as UK Pool. New Grid Company (NGC ) was responsible Market clearing, providing the transmission system and ancillary services

15. New Electricity Trading Arrangement (NETA) in UK Before the March 2001, any generator exporting more than 50 MW on to the system is required to hold a generation licence and to trade its output via an open commodity market, the Electricity Pool. After March 2001, New wholesale electricity trading arrangements (NETA) was introduced . In the NETA design the old day- ahead pool based on a coordinated - spot market with a market-clearing price was replaced by a three- and- a half-hour ahead balancing system with a complex pricing scheme that features pay- as- bid mechanism with rules intended to penalise imbalances. The governance arrangements that supported ETA include the establishment of a Balancing and Settlement Code (BSC) Panel, to oversee the Code and to to provide or procure a range of operational and administrative services, both directly and through contracts with service providers.

16. The new arrangements include: Forward and futures markets a Balancing Mechanism in which the NGC, as system operator, accepts offers of an d bids for electricity close to real time to enable it to balance the system; a Settlement Process for charging participants whose contracted positions do not match their metered volumes of electricity, for the settlement of accepted Balancing Mechanism offers and bids an d for clearing costs of balancing the system. Ancillary service is managed by NGC and the cost associated with the provision of AS are transferred to the Consumers through transmission payment.

17. Two major Ancillary Services Frequency Control Primary frequency regulation; Secondary frequency regulation; Tertiary frequency regulation Voltage Control Replacement or supplementary reserve Frequency Control Required to keep the frequency between 49.5 and 50.5 Hz. During contingency, frequency is allowed to drop under 49.5 Hz, but for not more than 1 minute. Primary frequency regulation is mandatory for all generators with installed capacity of over 50MW.Generators are set for a droop of 3–5%. Secondary frequency regulation is considered as a commercial service and it is not considered as a mandatory provision. Generators provide it using AGC. The consumers pay through an increase in their electricity tariff which includes capacity, operation and compensation.

18. •NGC responsible for managing ancillary services. •The costs associated recovered from the consumers through uplift in transmission payment mechanism. Voltage Control: Provision : all the generation units with a capacity over 30 MW. Voltage must be kept within the range of Vnom +- 10% for 400, 275 and 132 kV networks and the power factor (PF) between 0.85 capacitive and 0.95 inductive. The ratio of capacity price to operation price is approximately 1:2.

19. On March 31, 1998 California became the first sate to offer all customers a choice of electric service providers . There are three significant characteristics in California Model . A Zonal approach is app lied to simplify the transmission pricing scheme, including nodal and congestion charge assessing. Multiple separate energy forward markets, each with a supply and demand portfolio managed b y a Scheduling coordinator (SC) or PX, have been introduced.

20. CALIFORNIA ASM regulation up, regulation down, spinning reserve non-spinning reserve. Ancillary Services: RT and DA Co-optimized with energy in both RT and DA Spinning and non-spinning reserves with scarcity pricing Regulation After the power market crisis of 2001, the Californian ISO (CAISO)redesigned its electric energy market. It then introduced the concept of available capacity ( ACAP), whose objective is to allow the ISO to verify in advance the availability of enough resources to satisfy the customer load as well as reser ves . I n the new market structure, the energy market,the ancillary service market and the congestion management market are jointly optimized.

21. Voltage Control The ISO procures reactive power support services on long-term contracts from reliable must-r un generating units. The actual short term requirement is deter mined on a day-ahead basis, after the real power market is settled and the energy demand and schedules are known. The generator s are mandated to provide reactive power within the power factor range of 0.90 lag to 0.95 lead. Frequency Control Primary frequency regulation and secondary frequency regulation are not mandatory services. There exists up and down service regulation. The costs associated with this service correspond to capital,operation , fuel, and reduced efficiency costs, etc. For secondary frequency regulation, the service must be available in 10 min and should be supported for at least 2 hours. The system operator calculates the quantity required of the service according to a criteria that takes care of demand and contingency. The quantity required generally comes close to 3% of the maximum demand of the system.

22. AUSTRALIA ANCILARY SERVICE MARKET (AEMO ) • AEMO operates 8 separate markets for the delivery of frequency control ancillary services (FCAS) • purchases network control ancillar y ser vices (NCAS) and system restart ancillary services (SRAS) under agreements with service providers Australian Deregulation Process In Australia, the deregulation of the electrical system began in 1998 . As part of this process, the National Electricity Market (NEM ) was created, in order to increase competition at every stage of the electricity production and distribution. The National Electricity Market Management Company Limited (NEMMCO ) is the system operator and the ancillary services market administrator . Initially, ancillary services were traded through long-term bilateral contracts between NEMMCO and the services suppliers. Since 2001, frequency control ancillary services are traded in competitive spot markets The payments are collected from customer s only or from customers and generators on a 50% to 50% shared basis

23. Through competitive bidding Payments include payments for availability and for the delivery of the services normal operating band of frequency: 49.9 Hertz to 50.1 Hertz. Frequency control divided into two reasonably distinct subsets: Regulation: correction of the generation / demand balance in response to minor deviations in load or generation. controlled centrally from one of AEMO’s two National Dispatch and Security Centers . Provided through AGC action. Contingency: correction of the generation / demand balance following a major contingent event such as the loss of a generating unit or a large transmission element It’s a locally controlled action like, Generator Governor Response, Load shedding, Rapid Generation.

24. NCAS Voltage Control Synchronous Compensator: a generating unit that can generate or absorb reactive power while not generating energy in the market; Generation Mode: a generating unit that can generate or absorb reactive power while generating energy in the market. Network Loading Control to control the flow on interconnectors to within short term limits can be controlled through the use of Automatic Generation Control or Load Shedding . System Restart (SRAS ) • Provided by two separate technology 1. General Restart Source: a generator that can start and supply energy to the transmission grid without any external source of supply . . Trip to House Load: a generator that can, on sensing a system failure , fold back onto its own internal load and continue to generate until AEMO is able to use it to restart the system.