Ancillary services make up a falling share of the revenue stack for battery energy storage, as frequency response prices have fallen. But could new markets for other ancillary services change this? Through its pathfinder schemes, the ESO has been testing new ancillary services for stability, voltage, and constraint management.
These solve locational grid problems, and are procured in different areas depending on the system need. So far, the ESO has procured these services in competitive tenders for delivery a year ahead or more. However, we expect to see a shift towards shorter procurement timelines - with a day-ahead market planned for stability services as early as 2026.
In this article, we look at the requirements and potential value of each of these services.
Stability
Stability services are designed to increase the grid's inertia and short-circuit level (SCL). This allows system frequency (inertia) and voltage (SCL) to remain stable during unexpected disturbances.
Historically, large thermal generators synchronized to the grid provided these benefits due to their design, but as the grid has become more renewable, this cannot be relied upon. Currently, the ESO turns up thermal generators in the Balancing Mechanism when inertia is below operational levels. The stability pathfinder aims to create competitive markets to procure these services instead.
The ESO has completed three pathfinder tender rounds so far, with generators paid an availability payment (£/settlement period) for providing inertia and short-circuit level. Batteries using grid-forming inverters were able to participate in the second of these tenders.
Five batteries won year-long contracts in the second round, which focused on maintaining short-circuit levels in Scotland. Contract values ranged from £5k to £25k/MW/year, although operators must consider this revenue alongside the increased costs of a grid-forming inverter.
Following the three pathfinder rounds, ESO has progressed towards a final stability market design. The mid-term market, contracting inertia and short-circuit level at year ahead, was launched in October 2023, and first results are due in September 2024. A day-ahead auction for the service could launch as soon as 2026.
Reactive power
As generation has become more decentralized and embedded into the distribution network, some transmission lines can spend extended periods at low utilization. In some areas, this has increased the amount of reactive power on the network, which must be absorbed to stop voltage increasing.
Currently, the ESO manages reactive power through the Obligatory Reactive Power Service (ORPS). The grid code requires all transmission-connected generators to provide this service. This includes transmission-connected batteries, that are required to vary the amount of reactive power in their output.
In practice, just three batteries have performed the service to date - earning an average of £1.5k/MW/year.
In addition to ORPS, two voltage pathfinders tenders have been run. These tenders aimed to procure reactive power in specific regions, under long-term contracts. So far, only one battery, Capenhurst, has won a tender. It receives an availability payment worth £2.6k/MW/year over a contract lifetime of 9 years.
Results from a third pathfinder for London and Northern England are due in October 2024. Before the ESO moves towards a long-term market mechanism, we may see more pathfinder tenders in the future.
Constraint Management
Finally, the ESO is trialling new ancillary services for managing transmission constraints. These typically form as wind power generated in Scotland and Eastern England flows to demand centers in the South East.
Currently, the ESO must anticipate a constraint forming and re-dispatch generators in the Balancing Mechanism. This reduces transmission flows pre-fault, to avoid overloading transmission lines.
It is looking to increase its intertrip capacity as a way to operate transmission boundaries at a higher utilization. This requires generators to quickly trip offline if there is a transmission fault, to ensure a boundary does not become overloaded.
Two constraint management pathfinder tenders have run so far, for generators above the B6 boundary in Scotland and east of the EC5 boundary in Eastern England. When generators may be required to trip they are sent an ‘arming’ message. Generators receive an arming payment per settlement period in addition to a flat fee if tripped.
So far, only one battery - Wishaw - has won a contract, with a £3.8k/SP arming fee and a £50k trip fee. However, it was only armed for 1 minute in the 2023/24 contract year, compared to the almost 4 days for Whitelee wind farm.
Whitelee earned revenues of £1.4k/MW/year from availability payments in this contract year. However, it is unlikely that a battery would earn revenues this high. Batteries are currently limited in how they can provide intertrip services as they can only be armed and tripped when exporting, as opposed to being sent a signal to import.
Following the pathfinder tenders, the ESO is running two enduring tenders for the B6 and EC5. The EC5 tender will conclude in Q4 2024, as the B6 tender starts.