Question

Identify the documents1 governing the provision of ancillary services in Texas or in another region of your choice. Determine the mechanism used to obtain each service. When services are compulsory, determine their parameters (e.g. minimum lead and lag power factor for generators). » When services are procured on a competitive basis, describe the structure of the markets for ancillary services (duration of contracts, bid parameters) Pay particular attention to the definition of reserve services. Identify the mechanism used to pass on the cost of ancillary services to consumers.

Answer 1

Ancillary services are the services necessary to support the transmission of electric power from seller to purchaser given the obligations of control areas and transmitting utilities within those control areas to maintain reliable operations of the interconnected transmission system.

Ancillary services are the specialty services and functions provided by the electric grid that facilitate and support the continuous flow of electricity so that supply will continually meet demand. The term ancillary services is used to refer to a variety of operations beyond generation and transmission that are required to maintain grid stability and security. These services generally include, frequency control, spinning reserves and operating reserves. Traditionally ancillary services have been provided by generators, however, the integration of intermittent generation and the development of smart grid technologies have prompted a shift in the equipment that can be used to provide ancillary services.

Six different kinds of ancillary services:

scheduling and dispatch
reactive power and voltage control[1]
loss compensation
load following
system protection
energy imbalance

Ancillary Services
Ancillary service markets in the electricity sector are paramount to grid reliability and minimizing the consequences of capricious power generation. In order to maintain voltage and frequency stability on the system, grid operators call upon units to provide standby increases or reductions in supply. These standby services, known as ancillary services, were established after deregulation as a means toward valuation of the services that vertically integrated utilities traditional deployed in-house to maintain the grid's stability.

Ancillary service markets are categorized based on the timescale of the response to a request. Figure 9.5 illustrates the temporal and operational topology of existing ancillary service markets. Spinning reserves, for instance, must be provided within roughly 10 minutes of the grid operator's request. Regulation services, in comparison, are intended for minute-to-minute fine-tuning of the grid frequency. Typically these services are the most difficult for conventional generators to provide, and typically command the highest price. In the absence of ancillary services, a violation of the grids narrow frequency thresholds (+ or – 1%) will result in cascading failure, as synchronous generators disconnect to protect their systems

Replacement reserve Contingency operations Supplemental reserve Frequency responsive spinning reserve Normal operations Load following/energy imbalance Regulation Voltage control 100 0.1 10 Time (minutes)

Ancillary service markets are another mechanism for eliciting investment in the operational capabilities needed for renewable integration and efficient GHG emissions reductions. Ancillary services are procured by RTOs on behalf of LSEs, although self-provision is also allowed. Although they currently typically account for between 5 and 10 percent of total wholesale expenditures, increased procurement associated with renewable integration could raise this amount over time.

There are two categories of ancillary services currently offered through bid-based auction markets in RTOs: regulation and operating reserves. Both types of ancillary services can be provided by traditional generation resources as well as, more recently, by nongeneration resources. Table 19.4 shows that RTOs do not offer these products uniformly, and pricing rules for particular products also differ between them. However, the requirements of renewable integration are prompting interest in establishing markets for particular ancillary services where they do not already exist and, where they do, possibly modifying pricing rules or adding additional products [11].

The increased demand for regulation that may accompany renewable integration has prompted additional interest in eliciting storage and demand response into the regulation market as well as possibly requiring wind resources to respond to regulation signals. Although conventional thermal resources are currently the main providers of regulation, the addition of a carbon price may eventually provide a competitive advantage to noncarbon-emitting resources, such as storage resources, that can provide the service, or at least ones with lower net carbon impact. Preliminary research suggests that operating such plants primarily for quick-response ancillary services results in higher emissions per MWh due to a loss of efficiency [40].

As variable-generation penetration increases, a key issue will be the allocation of the costs of ancillary services caused by these resources: If allocated to the cause of the increased costs, they will encourage variable resources to firm their output through investment in on-site storage. Alternatively, if they are averaged to load, there could be less incentive to find the least cost technological solution.
Expected Ancillary Services (AS) Market Structure in India Phase I (As proposed by NLDC Under phase-I only one service under Frequency Support Ancillary Service (FSAS) is expected to be launched, limited to generation side services. - .Phase ll (Expected) Frequency Control Ancillary Services Primary (Local automatic control: generators and loads) Secondary (Central automatic control: generators) Tertiary (Manual control: generators and loads) Network Control Ancillary Services (NCAS) Voltage Control Ancillary Services (NCAS) " Power Flow Control Ancillary Services (NCAS) System Restart Ancillary Service (SRAS)

Expected AS Market Structure in India: Triggering of FSAS SLDCs are apex bodies responsible for optimum scheduling and despatch of electricity at a state level 50.10 50.00 49.90 49.80 Target Grid Frequency SLDCs/Utilities would have a window of time to balance load and generation before FSAS kicks in at a specified frequency (say, 49.65 Hz) if they do not intend to procure energy from the AS market This range provides flex ibility to utilities to take corrective actions to balance load and generation 49.70 49.65 49.60 For example, an over drawl/ loss of Trigger point for Ancillary Services generation of about 700 MW would result in drop from 50 Hz to 49.65 Hz in the NEW-NE grid Power Number is the sustained change in MW of load-generation baance that resut s in a change in frequency of 1 Hz. Power Number for the NEW-NE grid is about 2000 MW per Hz. FSAS process would be initiated by NLDC at the specified frequency

Expected AS Market Structure in India Day Ahead Bid process and dispatch Power Accredited Generators NLDC Exchanges Forecast the Required úuantity (MW)- Tentative Conducts Day Ahe ad Bidding Bid for providing Ancillary Services Notify withdrawal (if any) at least 3 hours before dispatch Notifies anonymous area- wise bids to NLDC 6 5 4 Dispatch notification of selected bids 6 time blocks prior to dispatch Notifies bidders imme diately about the bius 7 9 Supply Power Provides complete details of the bidde rs

Expected AS Market Structure in India Payment Mechanism ture in India: Payment Mechanism Utilities/Ent ities Power AS Power Generators RLDC RPC Exchanges Computation of Ul and ancillary payment Obtains data Energy Accounting AS Charges/ Penalties 5 Make (MU] based onNotites payment for drawls under UI & AS to UI Account 4 Notifies scheduled & payment actual dispatch infor mat ion AS Charges/ Penalties Payment from UI Pool Account

Key aspects of Ancillary Services Market Design Mode of Procurement Mandatory, Bilateral, Competitive Bids, Spot Market Price discovery Pay as bid, Uniform pricing, Normative tariff Tariff structure Fixed, Capacity, Utilization, Utilization Frequency, Opportunity Cost Duration of contractsShort term, Long term Effective monitoring To ensure fair competition, Price cap

Procurement methods used in AS markets Countries follow different approaches in procuring Ancillary Services Ancillary Service requirement is typically estimated by ISO Ancillary Services such as Primary Frequency Control (through speed governors) and Basic Voltage Control are mandated by the regulators in some countries/markets Secondary and Tertiary Frequency controls are procured through tendering process or through spot market by the ISO or through bilateral contracts by utilities. Black Start or System Restart services are procured through competitive bidding where it is not mandatory.

Procurement of Ancillary Services in Select Markets1 Tendering process SN Ancillary Service Compulsory provision Bilate ral contracts Australia France, New Zealand France Spot market 1Primary frequency Spain, PINM Germany, GreatAtlia, Ne Aust ralia, New Zealand Britain, New Zealand, Sewden control 2 Secondary Germany, NewAustralia, Spain, Zealand freque ncy control PIM 3 Basic voltage control Australia, Spain, Germany, France, New France, Great Britain, New Gre at Britain Zealand Zealand, PIM, Sewden 4 Enhanced voltage France, Australia, Spain, Great Britain control Germany 1. Based on Paper by Rebours, Kirschen, Trotignon and Rossignd - A Survey of Frequency and Votage Contrd Ancllary Services Part ll: Economic Features

Pricing Ancillary Services Regulators have different approaches for pricing Ancillary Services such as mandating ancillary services with no explicit cost, a regulated (normative) price, uniform pricing and pay as bid price In Uniform pricing method, all successful bidders are paid the price of highest bid accepted In Pay as bid pricing bidders are paid at the price they have bid Most of the US markets use uniform pricing for frequency control ancillary services Countries such as Great Britain, France and Germany have adopted pay as bid pricing CERC's consultation paper (2010) has suggested uniform pricing for Ancillary Services in India

Pricing method used in various countries1 S. Ancillary Service No None Regulated Price Pay as bid price Common Clearing Price Australia 1Primary frequency Spain, PJM New Australia, France, Germany, Zealand Great Britain, New Zealand control Sewder 2 Secondary Australia, Spain, PJM, France, Australia, Spain, frequency control Germany, New Zealand, Great Britain, Sewden PIM 3 Basic voltage contro Australia, Spain, PIM, GreaFrance, Gre at Britain, New Germany, Sewden Britain Zealand 4 Enhanced voltage Spain Australia, France, Germany, Great Britain control 1. Based on Paper by Rebours, Kirschen, Trotignon and Rossignd - A Survey of Frequency and Votage Contrd Ancllary Services Part ll: Economic Features

Uniform Pricing Versus Pay-as-Bid Pricing Marginal Costot A Uniform Price Auction,Total Consumer Demand Pay as Bid Auction1 7|Average Price Uniform Market Clearing Price B DCMW C Mw Proponents for uniform pricing argue that under competitive conditions, market prices are unlikely to be different between uniform price and pay-as-bid price; as utilities may bid higher than their marginal cost in pay-as-bid price1 Theoretically, Pay-as-bid price is effective incase utilities bid based on their marginal cost 1. Source Uniform-Pricing versus Pay-as-Bd in wholesale Electricity Markets: NYISo

Issues in Uniform Pricing model for multi product FCAS Multiple products under FCAS (from Regulation to Replacement) can be procured either sequentially or simultaneously. (Relevant for Phase-2 in India) Under Uniform Pricing model, sequential bidding may result in adverse selection where a better quality resource (e.g. Regulation reserve) is priced lower than a poor quality resource (e.g. Replacement reserve). Sucha situation is called "Price Reversal". To address "Price Reversal", California market has implemented simultaneous bidding with rational buyer approach. Rational buyer approach minimizes the overall procurement cost while considering technical constraints Incase of Pay as bid approach, both sequential and simultaneous bidding did not show any such adverse impacts