Ancillary Services in ERCOT are a huge part of the revenue stack for battery energy storage systems in ERCOT.
While Ancillary Service prices have been declining relative to energy, they still remain important for locking in revenues with a higher level of certainty than Energy Arbitrage.
Ancillary Services — particularly reserve services — can also be useful for securing revenues without needing to cycle a battery as often as other strategies.
However, all of ERCOT’s Ancillary Services are deployed from time to time.
So, what happens when they are?
Who provides Ancillary Services when they are deployed?
ERCOT deploys most Ancillary Services proportionally among operators with Ancillary Service Responsibility.
The amount of capacity ERCOT expects a resource operator, or Qualified Scheduling Entity (QSE), is expected to deploy is based on the proportion of the total responsibility for that service that they've been awarded.
So, if an operator has been awarded 10% of the total responsibility to provide a given Ancillary Service, they are expected to provide 10% of the response whenever ERCOT deploys that service.
This means that that operator provides their proportion of the deployment across its portfolio of generation resources.
And, the operator can divide its responsibility among the resources it operates in whatever manner it chooses, up to the amount a given resource is qualified to provide.
Let’s use the graph above as an example. ERCOT deploys 50% of its total procured ECRS responsibility - or capacity.
As a result, each operator deploys 50% of its awarded ECRS responsibility.
Non-Spinning Reserve is the exception to this, as ERCOT deploys it at the resource level rather than the operator level.
This can result in Non-Spin deployments having uneven distributions among resource operators.
What does deploying capacity actually mean?
Deployment of Ancillary Services falls into two categories:
- Generation increase (or decrease)
- Release of capacity to Security Constrained Economic Dispatch (or SCED)
Deployment of Ancillary Services with expected generation increase or decrease
Regulation Up and Down are in the first category. As frequency moves above or below 60 Hz, ERCOT deploys these services.
Imagine ERCOT procures a total of 250 MW of Regulation Up and awards an operator 50 MW - or 20% - of it.
Now, let’s say ERCOT is currently deploying 200 MW of regulation up - or 80% of the total procured.
ERCOT expects the operator to provide 20%, or 40 MW, of this deployment.
The operator must provide an additional 40 MW of generation beyond what SCED dispatched across its portfolio of generation resources.
So, if a single resource is assigned all of that operator’s Regulation Up responsibility, ERCOT expects it to increase its output by 40 MW above its base point, in this example.
ERCOT deploys Regulation Down in an identical manner, but expects resources to reduce output or increase consumption.
Deployment of Ancillary Services by release of capacity to SCED
The second way that Ancillary Services are deployed is by releasing capacity to the economic dispatch.
Responsive Reserve Service (RRS), the ERCOT Contingency Reserve Service (ECRS), and the Non-Spinning Reserve Service (Non-Spin) all deploy capacity in this manner.
Essentially, this means resources make some or all of their previously reserved capacity available for dispatch.
However, one of the key things to note is they don’t immediately increase their actual generation output.
Let’s walk through an example.
ERCOT procures 2,000 MW of ECRS and awards the operator 200 MW - or 10% - of it.
As with Regulation deployments, the deployments of these Ancillary Services still happen proportionally.
If ERCOT deploys 1000 MW of ECRS, then the operator provides 10% of the deployment, or 100 MW.
Let’s say the operator has placed all 200 MW of that ECRS responsibility on one resource, a 250 MW battery.
First, the operator receives an instruction from ERCOT to deploy ECRS.
The operator then adjusts the battery’s telemetry to show that it released 100 MW of its ECRS responsibility to SCED.
At this point, SCED treats the 100 MW of ‘released’ capacity as regular energy in the offer stack. This corresponds to the 100 MW increase in the resource’s High Dispatch limit.
This means the resource is dispatched according to its Energy Offer Curve. In other words, any generation increase will be a result of SCED dispatch.
As a result, SCED may not use some or all of the released capacity - if it can meet the grid’s demand via cheaper resources.
The mechanics of when deployment happens are different for RRS, ECRS, and Non-Spin and their various sub-types. However, this ‘release of capacity’ is consistent across all of them.
Learn about the criteria ERCOT uses to deploy the various Ancillary Services here.