Providing As Thro Eff Market

Providing Competitive Ancillary Services through Efficient Market Structures B. Bonvini, nonmember [email protected] 0

Electrical Engineering Department University of Genoa Via alla Opera Pia 1la Genova, Italy

G. B. Denegri, nonmember [email protected] Electrical Engineering Department University of Genoa Via alla Opera Pia 11a Genova, Italy

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Abstract Most electric companies are facing structural changes due to increasing economic pressure towards deregulation and creation of power markets. One of the most critical issues still remaining open in this context is providing ancillary services competitively. The main focus of the paper is the implementation of a framework for the valuation of ancillary services that market participants are selling or buying, so that the optimal prices at which exchanging each service will be more easily agreed by the parties. The quantifying method proposed in the paper is based on the relationship between the availability (the use) of the generic ancillary service and the state (the transition) the system is presently experimenting. The efilcacy of the method is tested with reference to different active power services, given by spinning reserve and frequency regulation. Keywords: Ancillary Services, Balancing Markets, Valuation Techniques, Spinning Reserve, Frequency Regulation. I. INTRODUCTION

Our investigation starts with the consideration that a cost-based approach to set up the service price is not very attractive from the producer point of view, which could be thus encouraged to enter the primary market avoiding ancillary services provision. More stimulating is adopting a value-based price formulation, where the value is intended as the economic benefit due to the presence of the specific service in term of reliability and/or security of supply for the entire power system. The paper proposes a valuation technique derived from the transitions the power system is called to face with or without the specific ancillary service. 11. ANCILLARY SERVICES AND SYSTEM OPERATING

STATE TRANSITIONS An extension of the basic diagram of the system operating states is considered to develop the framework. Ancillary services technicaVeconomic valuation can be associated to the costs of primary service supply in different operating conditions for the electric energy system. Furthermore, the availability and use of an ancillary service avoids system transitions towards critical states or allows recovery of a normal state starting from emergency. Table I reports on two ancillary services, highlighting the reference contingencies and the state transitions occurring according to the resource availability. Specifically, NE stands for “normal, secure, economic”; A identifies the alert state with a reduced degree of security, while RIC refers to a state with load partially curtailed. The service valuation is identified with the difference of primary cost in the arrival permanent states in case of its absence and presence, also accounting for the cost of not supplied energy. Results are presented with reference to frequency regulation and spinning reserve.

M. Invernizzi, nonmember [email protected] Electrical Engineering Department University of Genoa Via alla Opera Pia 1 la Genova, Italy

P. Scarpellini, nonmember [email protected] ENEL S.p.a. SRI Via A. Volta 1 Cologno Monzese, Italy

TABLE I - ANCILLARY SERVICES / STATE TRANSITIONS IANCILLARY I Reference 1 Transitions 1 Transitions in SERVICE [ contingency 1 in presence [ absence I LOSS of generation I

reserve Frequency I PowerRegulation

I LOS of tie-line I Uniform and limited load increment

I I

I

I

NE=>NE 1 N E = > ” E or NE=>RIC ~~

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111. VALUATION OF FREQUENCYROWERREGULATION AND SPINNING RESERVE The overall value of the frequency/power regulation service is given by (l), in case of no violations; otherwise estimation (2) will be valid: V(j/P) = F ~ - F E N E ~ [MUh] (1) V V P ) = Fmc - F N E i [MUh] (2) v V P ) = V V P )fMWload(NE 1 ) [MUMWh] (3) where (3) expresses the services unitary value. A higher value in case of security violations is expected, to translate the increasing importance of internal generation resources in case of not fully exploitable regulating reserve coming from neighbouring areas. This is quantified with reference to a test case as pointed out in Tab. 11. The same procedure applies in the case of spinning reserve: V(B) = Fwc - FA [MUhI (4) v ( % )= V ( % ) / M W Z o a d ( N E l ) [MUMWh] (5) V P ( 3 ) = v ( 3 )* f [MUMWh] (6) where in (6) the unitary value is additionally weighted according to rate of occurrence f of the contingency. Numerical examples are given in Table 111. IV. CONCLUSIONS

Since ancillary services are mostly provided to prevent the system transition to emergency conditions, the wellknown diagram of the states has been recalled for their valuation. Results confirmed the relationship between the service value and its importance for the system. TABLE 11: FP REGULATION FNNE~ I 5367 I FRIC I 7346.5 F N E ~I 5309.7 I F N E ~I 5309.7 Vfip)

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I

57.3

I

VU7) 1 2036.8

II

TABLE 111: SPIN. RES. FRIC

I

22509 5176.5 17332.5