Frequency Containment Reserve (FCR)
Frequency containment reserve (FCR) in the European Union Internal Electricity Balancing Market means operating reserves necessary for constant containment of frequency deviations (fluctuations) from nominal value in order to constantly maintain the power balance in the whole synchronously interconnected system.
18 July 2022
Regulators have now until 3 December 2022 to agree on the Transmission System Operators’ proposal for the minimum activation period to be ensured by those FCR providers having units or groups with limited energy reservoirs to remain available during alert state.
ACER Decision No 08/2022 of 18 July 2022 on the request of the regulatory authorities of the Continental Europe synchronous area to extend the period for reaching an agreement on the proposal for the minimum activation period to be ensured by frequency containment reserves providers
Legal definition of the ‘frequency containment reserves’ is laid down by Article 3(2)(6) of the EU Network Code on System Operation where the FCR denotes "the active power reserves available to contain system frequency after the occurrence of an imbalance”.
Activation of these reserves results in a restored power balance at a frequency deviating from nominal value.
This category typically includes operating reserves with the activation time up to 30 seconds, they are usually activated automatically and locally.
Frequency containment reserves are supplied by reserve providers (generators, storage, demand response) and they are used by Transmission System Operator (TSO) to maintain frequency stable within a given synchronous area (e.g. continental Europe).
The settlement between TSO and a balancing service provider (BSP) of energy from a FCR is left optional in the Network Code on Electricity Balancing (NC EB) due to potentially small volumes of capacity and activated energy and the possible difficulties for measurement associated to the FCR process.
According to Article 46 of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing (Electricity Balancing Guideline - EBGL) each connecting TSO may calculate and settle the activated volume of balancing energy for the frequency containment process with balancing service providers.
The price, be it positive, zero or negative, of the activated volume of balancing energy for the frequency containment process is to be defined for each direction in accordance with the following table:
Payment for balancing energy
|Balancing energy price positive||Balancing energy price negative|
|Positive balancing energy||Payment from TSO to BSP||Payment from BSP to TSO|
|Negative balancing energy||Payment from BSP to TSO||Payment from TSO to BSP|
In most cases the activation of FCR is not remunerated, only its reservation is paid (Introduction to network tariffs and network codes for consumers, prosumers and energy communities, Technical Report, Leonardo Meeus, Tim Schittekatte, European University Institute, Badia Fiesolana, July 2018, p. 31).
Consultation Report on the FCR Cooperation of 31 May 2017 provided for the following TSOs conclusions regarding the evolution of FCR cooperation market design:
1. change the auction frequency from weekly auctions to daily all days auctions,
2. subject to technical feasibility and time restrictions the proposal for GOT and GCT is:
- GCT at 08:00 in D-1,
- Publication time at 08:30 in D-1,
- Gate Opening Time in D-5,
3. change the product duration from weekly to 4h products,
4. neither to implement linked bids nor multiple products,
5. not to introduce a cross border transfer of obligations,
6. not to introduce asymmetric products,
7. to allow indivisible bids, with a restriction that no divisible bid can be paradoxically rejected (this will be avoided by allowing overprocurement),
8. Maximum bid size of an indivisible bid will be limited to 25 MW,
9. not to introduce exclusive bids,
10. to keep the current minimum bid size of 1 MW,
11. introduce marginal pricing as the TSO-BSP Settlement scheme,
12. to investigate and to come up with a joint solution for harmonisation on these topics:
- rules for aggregation & centralized frequency measurement,
- monitoring & penalties,
- backup requirements (n-1).
Annual Report of the ACER and CEER on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 (Electricity Wholesale Markets Volume) published in October 2017 (p. 52) noted that, compared to 2015, some key changes had been observed in 2016 as regards the capacity procurement costs.
These costs decreased in several markets, e.g. in Austria, Germany and the Netherlands by 45%, 34% and 16% respectively.
According to the said Report of October 2017, this was partly due to the consolidation of the coordinated procurement of FCRs, a project that was launched in 2015 and extended to Belgium in 2016.
As a result, average prices of contracted FCRs in these markets decreased for the second consecutive year (e.g. in the Netherlands between 2014 and 2016 the average decreased by around 50%).
On 15 January 2018 the Draft Proposal for the exemption of the FCR Cooperation Parties from the obligation to allow balancing service providers to transfer their obligations to provide balancing capacity in accordance with Article 34(1) of Commission Regulation (EU) 2017/2195 establishing a guideline on electricity balancing has been published by TSOs from Austria, Belgium, Denmark, France, Germany, the Netherlands and Switzerland.
The above TSOs propose that cross border transfer of awarded capacity obligations should remain prohibited in their common FCR procurement
The said TSOs request the relevant exemption, which is reasoned as follows:
1. since the said TSOs are planning to implement daily procurement of FCR capacity, they consider that the risk for BSPs of not being able to meet their obligations is significantly lower than the case of weekly procurement (as a result, also the need for the BSPs to transfer their obligations in a cross border context is expected to be substantially lower);
2. linked to the limited needs to implement a cross border context, the said TSOs consider that the task of implementing such a solution comes with the following, significant complexity:
- the import and export limitation violations have to be reassessed each time a demand for cross border transfer of obligations is expressed,
- the k factor, as defined in Commission Regulation EU 2017/1485, of each LFC Control Area needs to be readapted every time a cross border transfer of capacity takes place;
3. the following conditions should be in place in order to have an efficient cross border transfer of obligations that does not induce market distortions, these conditions require a lot of time and effort by the said TSOs:
- harmonisation of penalties in case of BSP failure of delivery among the participating countries,
- design of a mechanism for the allocation of the relevant cross border capacity resulting from the respective import and export limitations should be developed,
- implementing the above mechanism in a central tool and in the LFC of each control area.
On 15 January 2018 the TSOs from Austria, Belgium, Denmark, France, Germany, the Netherlands and Switzerland published the Proposal for the establishment of common and harmonised rules and processes for the exchange and procurement of Frequency Containment Reserve (FCR) in accordance with Art. 33 of Commission Regulation (EU) 2017/2195 establishing a guideline on electricity balancing.