Ancillary services (electricity market)
The Directive 2009/72/EC defined ancillary service as 'a service necessary for the operation of a transmission or distribution system'.
14 February 2023
ENTSO-E's Response to the European Commission Public Consultation on Electricity Market Design - recommendations with respect to ancillary services legal regime
23 July 2021
Characterization of TSO and DSO Grid System Services and TSO-DSO Basic Coordination Mechanisms in the Current Decarbonization Context, Silva, R.; Alves, E.; Ferreira, R.; Villar, J.; Gouveia, C., Energies, 2021,14,4451, https://doi.org/10.3390/en14154451
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 November 2016 (COM(2016) 864 final 2016/0380 (COD) - the element of the documentation known as the ‘Winter Energy Package’) added to the above legal definition the following words: 'including balancing and non-frequency ancillary services but not congestion management'.
Article 2(48) of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast)
‘ancillary service’ means a service necessary for the operation of a transmission or distribution system, including balancing and non-frequency ancillary services, but not including congestion management
This amendment has been included in the reworded definition of the ‘ancillary service’ in Article 2(48) in the final text of the recast Electricity Directive (Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity). The definition of the 'non-frequency ancillary service' was, moreover, proposed by the European Commission’s Winter Energy Package to be included in the said Directive ('a service used by a transmission or distribution system operator for steady state voltage control, fast reactive current injections, inertia and black start capability').
The final text of the recast Directive in Article 2(49) ultimately adopted in this regard the following definition: ‘non-frequency ancillary service’ means ‘a service used by a transmission system operator or distribution system operator for steady state voltage control, fast reactive current injections, inertia for local grid stability, short-circuit current, black start capability and island operation capability’.
Ancillary services according to the recast Electricity Directive form an integral part of electricity markets (Article 2(9): ‘electricity markets’ are markets for electricity, including over-the-counter markets and electricity exchanges, markets for the trading of energy, capacity, balancing and ancillary services in all timeframes, including forward, day-ahead and intraday markets).
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 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:
In most cases, TSOs are mandated to do so by a general public service obligation to maintain system stability and security. There are ancillary services which are obligatory and not remunerated, with requirements stipulated by network codes, while others are traded according to market rules.
Services for congestion management are sometimes also mentioned as part of ancillary services (TSO – DSO Report, an Integrated Approach to Active System Management with the focus on TSO – DSO Coordination in Congestion Management and Balancing, ENTSO-E, E.DSO, CEDEC, GEODE, EURELECTRIC, p. 5), but, as was indicated above, the definition in Article 2(58) of the recast Electricity Directive, excluded them from the scope.
Examples of ancillary services that TSOs can acquire from generators are electricity for the compensation of grid losses, regulating power and emergency power.
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.
Legislative proposal included in the European Commission’s Winter Energy Package explicitly stated 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)).
This exclusion has been upheld by Article 2(22) of the Regulation (EU) 2019/943 of the European Parliament and of the Council on the internal market for electricity (recast).
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 expressed 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 (Article 17(2) of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast): “Member States shall ensure that transmission system operators and distribution system operators, when procuring ancillary services, treat market participants engaged in the aggregation of demand response in a non-discriminatory manner alongside producers on the basis of their technical capabilities”). 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.
The said Proposal for the Directive of 30 November 2016 also provided 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)
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
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.
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.
As regards further regulatory possible actions ENTSO-E's Response of 14 February 2024 to the European Commission Public Consultation on Electricity Market Design recommends establishing new, tailor-made ancillary services for both frequency and non-frequency needs of the system - ENTSO-E sees a need of more flexible regulatory requirements for defining and applying specific balancing services products.
Moreover, the ENTSO-E’s proposal is to explicitly exempt ancillary services markets from the EU Directive on Public Procurement - as the integration of balancing markets progresses, and as flexibility services are procured in an increasingly dynamic manner, (e.g. via auction platforms) such procurement constraints are not fit for purpose (as they result in lengthy and burdensome process) and redundant considering regular monitoring TSOs are subject to by NRAs.