It is helpful to understand Frequency Control Ancillary Services (FCAS) as FCAS price forecasts are needed to estimate generator and customer costs, as well as possible revenues for new and existing ancillary service providers.
AEMO procures regulation FCAS to balance frequency during normal operation. From May 2019, AEMO has procured a base of 220/210MW in the raise and lower regulation markets, respectively. However, the average volume procured across the day can be higher than this, depending on system requirements.
In our analysis, we have seen an evident change in regulation enablement from December 2020 onwards. Hence, in this week’s ‘Chart of the week’, we have shown the average time of day volumes from December 2020 to March 2021 and the same period 12 months earlier.
You might ask, what could have caused this change in regulation FCAS volumes? The first is that the National Electricity Market’s (NEM’s) frequency deviations have improved from the introduction of mandatory primary frequency response. An improved frequency means the average frequency error is reduced, resulting in less regulation balancing services being required. The second is that AEMO has tuned the bias factor used in their area control error calculation. This tuning was implemented from 9 December 2020, and in simple terms, AEMO has changed how much raise regulation is required for a given frequency deviation.All months from May 2019 to December 2020 have had a peaking profile, which on average peaks in the morning and the evening. We have included the average 2021 Q1 Victorian energy and raise regulation FCAS prices to show the relationship better. The December 2019 to March 2020 average volume peaks at approximately 315MW while 12 months later it peaks at 242MW, a difference of 72MW. Overall, in our graphed periods, we can see an average drop of 29MWs in raise regulation FCAS procured.
The contingency FCAS market volumes also experience high peaks. However, these peaks are driven by credible contingency events, such as possible lightning strikes that could trip generation or loads. For more information on this, please request a copy of our free FCAS insights webinar.
AEMO has also identified the need for additional volumes of contingency FCAS in the future low inertia system. These increased volumes may be procured through either new, very fast contingency markets or increased levels of the existing markets. Other drivers of volume changes in the future could include variability of solar and wind generation forecasts or the growth of rooftop solar. For example, as rooftop solar generation increases, it could in the future be considered the largest generator and increase raise contingency volumes.
We have developed a detailed FCAS forecasting methodology considering volumes, energy market optimisations and bidding behaviours every 30 minutes.
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