DER Participation in Ancillary Services Market: An Analysis of Current Trends and Future Opportunities

Abstract

In an effort to push for low-carbon transition, national governments and regulatory authorities are working to define market structures and legislative frameworks able to effectively support the spreading of electricity production from renewables. To this purpose, the opening of national Ancillary Services Markets (ASMs) to Distributed Energy Resources (DERs) plays a key role. However, pricing schemes and rules in place (e.g., incentives) can act as a barrier to the supply of regulation services by small-sized and renewable-based power plants. In this context, the present work evaluates the economic opportunities for DERs provided by the provision of tertiary reserve and balancing control in the Italian ASM. The research is carried out through the collection and processing of price data from the Italian electricity and gas markets over 4 years (2019–2022). Considering a reference architecture where DER units bid on the market through a Balancing Service Provider, the potential revenues on the ASM of a non-programmable or partially programmable DER unit are compared to the earnings expected of a conventional power plant in order to highlight whether unfair competition can represent a barrier. Then, possible evolutions in the current remuneration schemes are analyzed, to evaluate whether they can be able to support a better DER integration. From the analysis, it emerges that, even if negative prices could be useful to increase the competitiveness of RES-based power plants for downward regulation, the loss of the incentives can act as a deterrent to the offering of services on the market by DERs. Therefore, other regulatory options, such as the incentives retention in case of downward regulation, could also be needed.