​PJM procures Ancillary Services in its wholesale markets to ensure grid reliability. These services primarily exist to serve two purposes:

• to continuously maintain a grid frequency around 60 Hz, and
• to provide additional capacity quickly for unforeseen events, such as a generator outage.

Other services exist - such as the Black Start Service - that PJM maintains for other purposes, such as a grid restart in the event of a blackout. PJM does not procure these services in wholesale markets, and only a small subset of resources qualify.

​What are PJM’s Ancillary Services, and what purpose do they serve?

PJM procures four Ancillary Services through wholesale markets:

• Regulation,
• Synchronized Reserve Services (SRS),
• Primary Reserve Services (PRS), and
• 30-minute Reserve Services (TMRS).

​The three reserve services differ in the types of resources that can qualify to provide them, and in the expected response when called upon.

SRS includes only synchronized resources - in this case, this means actively online resources that can respond within 10 minutes or less.

PRS encompasses all SRS providers and additional non-synchronized resources - offline resources that can respond within 10 minutes or less.

Lastly, TMRS includes all SRS and PRS providers, as well as additional secondary resources - opening up eligibility to offline and online resources that can respond within 10 to 30 minutes.

Who Provides Ancillary Services?

Resources are eligible to provide Regulation if they:

• are within PJM’s control area,
• are able to receive and respond to automatic generation control signals from the system operator,
• demonstrate an ability to meet minimum performance requirements and pass an initial performance test defined by PJM, and
• are able to provide at least 0.1 MW of Regulation capability during the procurement interval - essentially, if a resource is normally eligible, but has no available headroom or footroom, it cannot be awarded Regulation.

Almost all resources are eligible to offer capacity into reserve markets if they are:

• within PJM’s control area,
• not flagged for “emergencies only”,
• not classified as nuclear, wind, or solar generation (unless an exemption is approved), and
• able to provide at least 0.1 MW of reserve capability in the interval of procurement.

Additionally, the following resource types are not eligible to participate as non-synchronized resources:

• Economic Load Response - a program where businesses reduce electricity consumption during periods of tighter supply,
• Hybrid Resources - a resource that uses multiple technologies at a single point of interconnection,
• Battery Energy Storage Resources enrolled in the ESR participation model - a framework that lets storage resources self-schedule and participate in energy, capacity, and Ancillary Service markets, and
• Pumped Hydro Resources not included in the PJM optimized pumped storage model - a day-ahead scheduling tool that co-optimizes pumping, generation, and reserves.

While a variety of resources participate across PJM’s Ancillary Service markets, specific resource types tend to fit into different roles based on their capabilities.

​For instance, batteries and natural gas-fired generators constitute the majority of Regulation volume provided. Among the reserve Ancillary Services, non-synchronous services are often provided by hydro generators and oil-fired resources, while natural gas and coal provide most synchronous reserve volumes.

​When does PJM deploy its Ancillary Services?

System operators deploy Regulation continuously to keep supply and demand closely matched. When frequency rises above or falls below 60 Hz, PJM notifies Regulation providers to increase or decrease output.

PJM deploys reserve services only after a disturbance occurs. In PJM, a disturbance is defined as a 60-second period in which the system loses either 900 MW, or 80% of the largest single contingency.

​Over the past 10 years, 175 of these disturbances have taken place, each averaging approximately 10 minutes in duration.

The Synchronized and Primary Reserve Service - or SRS and PRS - have a requirement to only sustain output for 30 minutes. PJM calls on the 30-minute Reserve Service (TMRS) if they need reserve output for longer than 30 minutes.

All resources providing reserve services - including TMRS - are only obligated to respond for up to 30 minutes following a deployment.

In the past 10 years, there have only been three reserve events that exceeded 30 minutes, and they all occurred during Winter Storm Elliot in January 2022. When it comes to pricing, this explains why TMRS typically clears at $0/MW - as it is rarely called upon.

How big is the market for each Ancillary Service in PJM?

​PJM sets its Regulation requirements to meet NERC control standards, maintaining frequency within predefined boundaries and correcting small deviations.

The system operator originally set the procurement requirement as a percentage of forecasted load, but later shifted it to a fixed effective MW value. This value fluctuates throughout the day depending on whether PJM is in a ramping period or a non-ramp period.

Separate NERC reliability rules - outlining expectations for response following a more severe frequency disturbance - and extended service requirements define the demand for reserve services.

The size of PJM’s largest contingencies ultimately sets the reliability requirement. Temporary conditions like weather alerts and emergencies set the extended service requirement, which uses a 190 MW baseline for all three reserves..

​For SRS, the reliability requirement is equal to the loss from the most severe single contingency in PJM - typically the loss of large generating resources like nuclear power plants. For PRS, the requirement is 1.5 times this contingency loss. For TMRS, the reliability requirement is the maximum of the PRS reliability requirement, the largest gas contingency, or 3,000 MW.

When fulfilling requirements in less restrictive services like TMRS, PJM counts resources assigned volume in more restrictive services. For example, PJM counts SRS volumes toward PRS and TMRS requirements.

​How do resources providing these services earn revenue, and how are Ancillary Services priced?

Regulation services are exclusively procured in the Real-Time Market. The payments made to participating entities are based on three factors: capability, performance, and lost opportunity cost. Click here to learn more about how PJM calculates Regulation requirements.

PJM procures reserve services in both the Real-Time and Day-Ahead markets.. PJM optimizes for the lowest-cost mix to meet each reserve requirement - alongside Regulation and Energy - subject to deliverability.

The market clearing price is calculated as the marginal price of the most expensive resource to receive an award in a given reserve market, plus the marginal prices of the more general reserve markets it contributes to.

As a result, the prices in PJM’s reserve markets have a nested structure, and providing a more ‘specific’ service automatically satisfies the requirements of broader services.

What this means in practice is that the SRS clearing price is the sum of the marginal price of not only the SRS market, but also the other two reserve markets. The PRS clearing price is then the sum of the marginal prices for PRS and TMRS. Lastly, the clearing price for TMRS is the marginal price of only that market.

Which Ancillary Services have historically been the most valuable to provide in PJM?

Regulation has consistently cleared at values that exceed reserve services like PRS and SRS by more than 5x.

​As a result, batteries in PJM have so far focused primarily on Regulation services. However, as more batteries reach commercial operations, this market will continue to mature, and there will be increasing competition among participants. This - along with the upcoming Regulation market redesign - will likely lead to declining Regulation prices.

As prices eventually decline, batteries will shift their focus toward SRS and PRS.

The recent price increases in these reserve markets suggest that these markets may also begin to present more attractive opportunities for battery energy storage. This has largely been driven by an increase in system scarcity in PJM - and as a result increasing energy prices.

If this trend persists as capacity market results imply, reserves could provide meaningful value for BESS in the near term. That is, until deployment reaches levels seen in markets like ERCOT, where saturation often diminishes revenues relative to performing Energy arbitrage - where a battery buys energy at low prices and sells at high prices within a given operating day.