Ancillary services help keep the electric grid stable and reliable. For businesses on retail energy contracts, these services can affect energy rates and overall costs. This article explains what ancillary services are, why they matter for the grid, how they work, and what it means for businesses in different areas.
What Are Ancillary Services in the Energy Industry?
Ancillary services are essential functions that keep the electric grid running smoothly. They are managed by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). These services provide backup power, voltage support, and system stability to balance changes in supply and demand.
Retail energy suppliers include the cost of ancillary services in the total energy price paid by customers, as they must reimburse the grid operator for these services. Ancillary services help the grid stay stable in many ways. Below is an overview of the main types of ancillary services in energy markets:
Types of Ancillary Services
- Load Regulation: Balances real-time changes in electricity supply and demand.
- Operating Reserves: Provides backup power for unexpected demand spikes.
- Voltage Support: Keeps voltage levels stable across the transmission system.
- Black Start Capability: Restarts the grid after a major outage.
Commercial businesses, especially large industrial users, may see these charges on their energy bills, particularly if they use hybrid energy products like block + index plans. Understanding these charges is important for managing and reducing energy costs.
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Why Are Ancillary Services Important?
Ancillary services keep the electric grid stable and reliable. They help the system run smoothly, even during peak demand or unexpected events. As electricity use grows, these services help operators manage power flow, prevent blackouts, and maintain system resilience.
For commercial customers, this means fewer disruptions and lower costs from unplanned outages or equipment damage caused by unstable power.
For retail energy providers, ancillary services are necessary to maintain the grid, especially as renewable energy and grid modernization change the energy landscape. Variable sources like wind and solar require more ancillary services to keep the grid balanced.
How Do Ancillary Services Work?
Ancillary services help keep the electric grid balanced in real time, managing fluctuations in supply and demand. Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) like PJM, NYISO, MISO, and ERCOT oversee these services across the grid.
These operators forecast energy demand and assign ancillary services to prevent disruptions in power transmission, from generation sites to end users. Market participants, such as electricity generators and battery storage owners, bid in day-ahead ancillary services markets. They are paid for being on standby and for helping stabilize the grid. Here’s a quick look at how some of the main ancillary services work:
1. Regulation Services
Regulation services manage short-term changes in grid frequency to keep the system stable. Power generation assets providing these services adjust output up or down as needed to match demand. For example, a battery storage system can charge or discharge in real time to help maintain the correct grid frequency.
2. Spinning and Non-Spinning Reserves
Spinning reserves are assets that are online and ready to supply power immediately, such as active power plants. Non-spinning reserves are offline but can be brought online within minutes. For example, a fully charged battery system can serve as a non-spinning reserve, ready to deploy when needed.
3. Voltage Support and Black Start Services
Voltage support keeps voltage levels stable across the grid. Black start services help restart the grid after a full outage. Each ISO and RTO has its own version of these services, with rules and requirements specific to the region. Next, we’ll look at how ancillary services operate in different electricity markets.
4. Replacement Reserves
Replacement reserves provide extra power when needed for several hours. These are backup generators that can be activated at any time to supply additional electricity to the grid.
Ancillary Services by RTO/ISO
Ancillary service markets differ by region, depending on the needs and infrastructure of each RTO or ISO. Here’s an overview of how major U.S. energy markets manage ancillary services:
1. PJM
- Regulation Market: Maintains frequency stability.
- Spinning and Non-Spinning Reserves: Provides quick-response power during outages.
- Black Start Services: Recovers the grid after major outages.
2. ISO New England (ISO-NE)
- Regulation and Reserves: Balances supply and demand.
- Voltage Support: Maintains voltage during high demand.
- Black Start: Enables grid restart in emergencies.
3. NYISO
- Operating Reserves: Includes spinning and supplemental reserves.
- Voltage Support and Black Start: Ensures voltage stability and system restoration.
4. ERCOT
- Regulation Up/Down: Manages frequency changes.
- Responsive Reserve Service (RRS): Supplies emergency power.
- Non-Spinning Reserves: Bring offline power online within 30 minutes.
5. CAISO
- Regulation Up/Down: Controls system frequency.
- Spinning and Non-Spinning Reserves: Provides grid balance services.
- Voltage Support: Maintains stable voltage across the grid.
Each RTO and ISO has its own ancillary service markets designed to meet regional needs and ensure a balanced, reliable electricity supply.
Renewable Energy and Ancillary Services
As wind and solar power become more common, ancillary services are essential to manage their variability. Unlike conventional power, renewable generation depends on the weather; solar works only when the sun shines, and wind turbines produce power only with sufficient wind.
Renewable energy assets rely on services like voltage support and frequency regulation to handle sudden changes in output, such as cloud cover or wind speed fluctuations.
Battery storage is increasingly used in ancillary service markets to support renewables. Storage systems hold energy when generation is high and release it during peak demand. This balances the grid, reduces dependence on fossil fuels, and makes it easier to integrate renewable energy into the transmission system.
Conclusion
Ancillary services are essential for keeping the electric grid stable and reliable. For commercial energy customers, knowing how these services affect retail energy contracts is important for managing costs. With the right knowledge and support, businesses can control these expenses more effectively, often with help from an energy broker or consultant. If you need guidance on how ancillary services impact your electricity supply contract, contact our team of energy broker experts. We have decades of combined experience working with retail electric providers to help customers secure the best energy supply terms.