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Ancillary services (electricity market)
European Union Electricity Market Glossary

 

 

Directive 2009/72/EC defines ancillary service as 'a service necessary for the operation of a transmission or distribution system.'

 

The EU Network Code on System Operation in Article 55(c) lists ancillary services among services provided by third parties, through procurement when applicable, that each Transmission System Operator (TSO) uses for ensuring the operational security of its control area.

 

Typical ancillary services procured by TSOs to ensure the management of the system divide into:

 

- frequency ancillary services (balancing of the system), and

 

- non-frequency ancillary services (voltage control and black-start capability).

 

In most cases, TSOs are mandated to do so by a general public service obligation to maintain system stability and security.

 

Legislative Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast) of 30.11.2016 (COM(2016) 864 final 2016/0380 (COD)) in Article 2(37) adds to the existing legal definition from the Directive 2009/72/EC the following words: 'including balancing and non-frequency ancillary services but not congestion management.'

 

The definition of the 'non-frequency ancillary service' is, moreover, proposed to be included in the said Directive (according to the aforementioned proposal it denotes 'a service used by a transmission or distribution system operator for steady state voltage control, fast reactive current injections, inertia and black start capability').

 

Examples of ancillary services that TSOs can acquire from generators are electricity for the compensation of grid losses, regulating power and emergency power.

 

Ancillary services according to the ACER's Framework Guidelines on Electricity System Operation (FG-2011-E-003) of 2 December 2011 mean services necessary to support transmission of electric power between generation and load, maintaining a satisfactory level of operational security and with a satisfactory quality of supply. 

 

The main elements of ancillary services include active power reserves and reactive power reserves for balancing power and voltage control.

 

Active power reserves include automatically and manually activated reserves and are used to achieve instantaneous physical balance between generation and demand.

Further elements of ancillary services may include inertial response, trip to houseload, spinning reserve and islanding capability.



A particular area in which there may be debate about what constitutes a capacity mechanism and what requires State aid approval is in the specification and procurement of ancillary services.

 

TSOs typically procure frequency (balancing of the system) and non-frequency (voltage control and black-start) ancillary services to ensure the management of the system.

 

In most cases, they are mandated to do so by a general public service obligation to maintain system stability and security.

 

Where such ancillary services are procured independently by TSOs, and where in particular the determination of the precise volumes and types of services to be procured is left to the TSOs without Government involvement, there will be a strong indication that the purchase of such services does not involve State aid and that those services are therefore not covered by this inquiry.

 

Such indication will be strengthened when procurement of such services is performed in a transparent, competitive and non-discriminatory way, thereby excluding undue advantages.

 

Another element to distinguish ancillary services from capacity mechanisms is the use and purpose of the services: when they are used in small volumes relative to the overall level of capacity in the market and only to provide short term corrections to enable system security, they will more likely be considered ancillary services.

 

However, where ancillary services appear to be contracted at the request of governments and/or are used to ensure capacity is available to balance the system over longer periods, they can have the same effect as capacity mechanisms.

 

Such measures may merit attention from the Commission and require State aid approval. 


 

Commission Staff Working Document of 30.11.2016 Accompanying the document Report from the Commission Final Report of the Sector Inquiry on Capacity Mechanisms {COM(2016) 752 final} SWD(2016) 385 final, p. 52, 53

 

Legislative proposal included in the European Commission’s Winter Energy Package explicitly states that ancillary services must not be treated as a capacity mechanism ('capacity mechanism' means an administrative measure to ensure the achievement of the desired level of security of supply by remunerating resources for their availability not including measures relating to ancillary services - Article 2(2)(u) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)).

 

In the liberalised market, ancillary services are contracted by TSOs from selected grid users that qualify for providing these services.

 

The aforementioned Proposal for a Directive of 30 November 2016 literally expresses the rule that transmission system operators and distribution system operators when procuring ancillary services, must treat demand response providers, including independent aggregators, in a non-discriminatory manner, on the basis of their technical capabilities (Article 17).

 

It is further developed in Article 40 of the said Proposal (Article 40(3) and (4)), which envisions that in performing the tasks of procuring ancillary services from market participants the transmission system operator must:

 

1. take into account the functions performed by the regional operational centres and cooperate as necessary with neighbouring transmission system operators, and


2. ensure that the procurement of balancing services and, unless justified by a cost-benefit analysis, non-frequency ancillary services, is:


(a) transparent, non-discriminatory and market-based;

 

(b) ensures effective participation of all market participants including renewable energy sources, demand response, energy storage facilities and aggregators, in particular by requiring regulatory authorities or transmission system operators in close cooperation with all market participants, to define technical modalities for participation in these markets on the basis of the technical requirements of these markets and the capabilities of all market participants.

 

The Supporting Document for the Network Code on Operational Planning and Scheduling of 26 March 2013 mentions ancillary services in the context of active power, reactive power and black start capability.

 

The first two ancillary services enable the TSO to operate a secure and reliable power system, whereas the last enables the TSO to reset the system after a fault (the matter of the emergency code).

 

In managing the transmission systems, the TSOs must be able to deal with unexpected changes of generation capacity, interconnector flows or system demand.

 

This is accomplished by maintaining a prudent level of active power ancillary services.

 

The responsibility is put on the TSOs to ensure the correct procurement and management systems are in place to ensure adequate/correct ancillary services.

 

There is the need to plan ahead to ensure the correct levels of active power ancillary services will be available once real time is reached.

 

Updates to this plan will be required for any significant network or generation changes that impact on operational security.

 

If when updating the plan a shortfall is detected, remedial action must be taken.

 

If a TSO finds itself in a shortfall position (after remedial actions have been investigated), communication and cooperation with neighbouring TSOs is a priority.

 

For reactive power, the TSOs must maintain a voltage balance across the transmission systems in order to maintain a secure and stable power system and to avoid damage to connected equipment.

 

To maintain the balance, the appropriate level of reactive power (leading and lagging) is required at appropriate locations in the transmission system.

 

The required level of reactive power varies in the operational timeframe.

 

Reactive power is mainly provided by generator units and transmission assets.

 

Generally, reactive power must be provided close to the location where it is needed.

 

Therefore, the requirement is for the flexible provision of reactive power at appropriate points across the transmission systems.

 

Secure and efficient system operation demands cross-border and cross-control area coordination.

 

Hence, there is a need to share information on ancillary services across interconnectors in the planning phase to ensure that everything reasonably practical has been done to ensure both operational security and an economically sound outcome.

 

Each TSO will publish the required levels of active power reserves.

 

This requirement inevitably will be among most important elements of the transparency of the EU Internal Electricity Market and likely will have also relevance to REMIT Regulation.

 

 

 

 

Article 2(2)(u) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)

 

 

'capacity mechanism' means an administrative measure to ensure the achievement of the desired level of security of supply by remunerating resources for their availability not including measures relating to ancillary services

 

  

 

 

 

The said Proposal for the Directive of 30 November 2016 also provides for the rule forbidding transmission system operators to own assets that provide ancillary services save under the conditions set out in Article 54 - see box below.

 

 

 

Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)

 

Article 54

Ownership of storage and provision of ancillary services by transmission system operators

 

1. Transmission system operators shall not be allowed to own, manage or operate energy storage facilities and shall not own directly or indirectly control assets that provide ancillary services. 


2. By way of derogation from paragraph 1, Member States may allow transmission system operators to own, manage or operate storage facilities or assets providing non-frequency ancillary services if the following conditions are fulfilled: 


(a) other parties, following an open and transparent tendering procedure, have not expressed their interest to own, control, manage or operate such facilities offering storage and/or non-frequency ancillary services to the transmission system operator;

 

(b) such facilities or non-frequency ancillary services are necessary for the transmission system operators to fulfil their obligations under this Directive for the efficient, reliable and secure operation of the transmission system and they are not used to sell electricity to the market; and

 

(c) the regulatory authority has assessed the necessity of such derogation taking into account the conditions under points (a) and (b) of this paragraph and has granted its approval.

 

3. The decision to grant derogation shall be notified to the Agency and the Commission along with relevant information about the request and the reasons for granting the derogation.

 

4. The transmission system operator shall perform at regular intervals or at least every five years a public consultation for the required storage services in order to assess the potential interest of market parties to invest in such facilities and terminate its own storage activities in case third parties can provide the service in a cost-effective manner.


 

 

 

 

Network Code on System Operation

 

Title 5 


Ancillary services 



Article 108
Ancillary services 



1. Each TSO shall monitor the availability of ancillary services.

 

2. With regard to active power and reactive power services, and in coordination with other TSOs where appropriate, each TSO shall:


(a)  design, set up and manage the procurement of ancillary services; 



(b)  monitor, on the basis of data provided pursuant to Title 2 of Part II, whether the level and location of available ancillary services allows ensuring operational security; and 



(c)  use all available economically efficient and feasible means to procure the necessary level of ancillary services. 



3. Each TSO shall publish the levels of reserve capacity necessary to maintain operational security. 



4. Each TSO shall communicate the available level of active power reserves to other TSOs upon request. 



Article 109


Reactive power ancillary services 



1. For each operational planning timeframe, each TSO shall assess, against their forecasts, whether its available reactive power ancillary services are sufficient to maintain the operational security of the transmission system. 



2. In order to increase the efficiency of operation of its transmission system elements, each TSO shall monitor:


(a)  the available reactive power capacities of power generating facilities; 



(b)  the available reactive power capacities of transmission-connected demand facilities; 



(c)  the available reactive power capacities of DSOs; 



(d)  the available transmission-connected equipment dedicated to providing reactive power; and 



(e)  the ratios of active power and reactive power at the interface between transmission systems and transmission-connected distribution systems. 



3. Where the level of reactive power ancillary services is not sufficient for maintaining operational security, each TSO shall:


(a)  inform neighbouring TSOs; and 



(b)  prepare and activate remedial actions pursuant to Article 23. 


 

 

 

 

Clean Energy Package: Promising market proposals, but some issues to be solved, ENTSO-E, 15 March 2017, p. 1


Restrictions for TSOs to control or own assets providing ancillary services (El. Directive Art. 54)


- The current Commission proposals would prevent TSOs from owning and/or controlling, directly or indirectly, assets that provide ancillary services. Exceptions for non-frequency ancillary services (steady state voltage control, inertia, fast reactive current injection, black-start capability) would be possible but only after a long and costly process. 



 

- Already today, to fulfil their responsibility to maintain grid stability, TSOs own or operate facilities which de facto provide ancillary services, either as main purpose or as a by-product of their operations, without any negative impact on the market. These facilities include for instance compensating devices, reactors, HVDC cables, capacitors, transformers, or even power lines, all of which are essential elements of the transmission grid.

 



- As things stand, preventing the ownership and control of such facilities by TSOs will create an extremely burdensome process with no tangible consumer benefits. The effect of these proposals would be to constrain TSOs ability to operate the grid, to ensure security of supply, to connect grid users and would ultimately increase system costs. Moreover, it would create a lack of coordination between maintenance and system operation to the detriment of the overall efficiency of the grid. 



 

- ENTSO-E does not dispute the fact that the ancillary services market should be open to the largest possible range of players and operate under the supervision of regulators or national policy-makers to prevent any market abuse. The present requirements of the Directive are however disproportionate, lead to risks for the operational security, bring no benefits to consumers and should therefore be significantly amended. Rather than including such far-reaching limitations, ENTSO-E proposes to empower national regulators or governments to oversee that any TSO involvement in such assets is proportionate to system needs and efficient in the interest of end-consumers. This would prevent any form of conflict of interest and ensure that service is provided at the lowest cost for consumers.


 

 

 

There are various reasons why governments or TSOs develop interruptibility schemes. Where used to procure demand response capacity to cover a general capacity shortage – as opposed to ancillary services to manage short term frequency deviations – interruptibility schemes can reduce incentives to invest in flexible generation capacity, in the same way as strategic reserves do. Whether interruptibility schemes actually have this effect depends to a large extent on their design.

 

Most of the interruptibility schemes currently in place are used by the TSO as an ancillary service, i.e. as an instrument the TSO uses after intraday gate closure, remotely and without any prior notice to the providers of the service. In such cases, the impact of the schemes on market incentives is limited.

 

Ancillary services can be provided by other, competing sources of flexibility so they do not necessarily have to be provided solely by demand response. A scheme limited to demand response excludes other providers of flexibility and therefore public authorities choosing to introduce DSR-specific measures should ensure they can justify any limited eligibility criteria. 

 

Commission Staff Working Document of 30.11.2016 Accompanying the document Report from the Commission Final Report of the Sector Inquiry on Capacity Mechanisms {COM(2016) 752 final} SWD(2016) 385 final, p. 150

 

 

 

 

 

IMG 0744

    Documentation    

 

 

 

 

 

Network Code on System Operation, Article 55(c), 108, 109

 

Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), Article 2(37), Article 54

 

Clean Energy Package: Promising market proposals, but some issues to be solved, ENTSO-E, 15 March 2017

 

Commission Staff Working Document of 30.11.2016 Accompanying the document Report from the Commission Final Report of the Sector Inquiry on Capacity Mechanisms {COM(2016) 752 final} SWD(2016) 385 final, p. 52, 53, 150

 

ACER's Framework Guidelines on Electricity System Operation (FG-2011-E-003) of 2 December 2011

 

Supporting Document for the Network Code on Operational Planning and Scheduling of 26 March 2013

 

 

 

 

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Last Updated on Tuesday, 18 September 2018 09:46
 

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