Incentives-based ancillary services for power system integrity

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• White-Paper-Power-Control-and-Renewables.pdf (609)

A reliable and efficient power system is a necessity for any industrialised society. Governments have to enforce regulations to guarantee that such a power system, in spite of many competing stakeholders, participants, companies and regulating agencies can be operational. This paper analyses the present arrangements and the future requirements to be posed on incentives and regulation for ancillary services for imbalance to guarantee a reliable and efficient operation of power systems in a market environment with responsive, reliable and accountable but also competing producers and consumers, a large penetration of renewables and continent-spanning transmission networks.

We assume that there are sufficient incentives and proper arrangements for creating and extending the infrastructure, that there are transparent and open markets for day-ahead trading of energy based on predictions of available power sources and demand. In the Netherlands, these markets are based on Program Responsible Parties (PRP) which are the only entities that are allowed and able to trade on these markets. As such, they are reliable and accountable for their operations, and are thus trustworthy partners.

These PRPs make predictions of both their own available production capacity and their own demand and their costs (costs and/or benefits) associated with producing and supplying energy. For achieving a better economic and/or technical solution, energy can be sold/bought bilaterally or on day-ahead markets. Based on their bids on these (future) energy markets, they can decide how much energy they will sell/buy on these markets to create an energy balance among their production, demand and net energy bought/sold from the markets, in all time periods of some future time interval (e.g. the next day). Their main incentive is to maximise profits by bidding energy contracts defined by time period, size and price. The market will decide how much net energy has to be delivered/received from other PRPs, and for what price. These considerations are based on predicted amounts of energy and prices. Uncertainty and disturbances are explicitly not taken into account.

This paper discusses what has to be done, from a systems point of view, to guarantee a reliable and economic operation of the power system in case of uncertainties and disturbances. We will focus on the arrangements, markets and required incentives to deal with Ancillary Services (AS) which are intended for and can cope with uncertainties and unexpected disturbances [1-6].

First, the PRP will be better defined and arguments will be given to determine its “optimal” size. Next, the present arrangements in the Netherlands will be discussed, analysed and commented on. It will be shown that the present way of dealing with uncertainty and disturbances is neither consistent, nor optimal, and is not well-suited to the challenges of the future [2,8]. A discussion is had about other, more market-based solutions to achieve that goal, namely the ahead markets for ancillary services.

The paper concludes with a consistent description of how these markets and their regulation could be organised with some final concluding remarks about the differences compared with present-day solutions.

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