Ancillary Services

Beyond Energy

When most people think about electricity markets, they think about energy — megawatt-hours sold at a price per MWh. But energy is only one of several products that RTOs procure to keep the grid reliable. The others — collectively called ancillary services — are less glamorous but equally essential.

Frequency Regulation

The grid operates at exactly 60 Hz. When demand exceeds supply, frequency falls. When supply exceeds demand, frequency rises. At 59.7 Hz, under-frequency relays begin tripping loads. Below 59.3 Hz, generators start tripping automatically to protect themselves. At that point, you have a cascading blackout.

Frequency regulation (also called "regulation service" or "regulating reserve") is capacity that responds automatically and continuously to keep frequency near 60 Hz. Generators providing regulation signal service respond to a signal from the grid operator every 2–4 seconds, ramping up or down by small amounts. Batteries and flywheels are exceptionally well-suited to this service — they can respond in milliseconds, far faster than any thermal generator.

Spinning and Non-Spinning Reserves

If a large generator trips unexpectedly, the grid operator needs backup capacity that can ramp up within minutes. Spinning reserve (or "synchronized reserve") is capacity from generators that are already running and can increase output within 10 minutes. Non-spinning reserve is capacity from generators that are offline but can start and reach full output within 10–30 minutes.

Reserve requirements are set by reliability standards (NERC in North America). The basic rule: you must have enough reserve to cover the loss of the largest single contingency on your system — typically the largest generator or transmission line.

Spinning reserve examples:

• A 500 MW gas combined-cycle unit dispatched at 400 MW has 100 MW of headroom — that 100 MW counts as spinning reserve because the unit is already synchronized to the grid and can ramp within minutes
• A hydroelectric dam with a partially open gate can increase output almost instantly — hydro plants are some of the most valuable spinning reserve providers on the system
• A large industrial customer enrolled in a demand response program can curtail 50 MW of load on a 10-minute notice, which also qualifies as spinning reserve (sometimes called "spinning demand response")

Non-spinning reserve examples:

• A simple-cycle gas peaker that is offline but can start, synchronize, and reach full output within 30 minutes — these units sit in "hot standby" and can be called on short notice
• A diesel generator at a military base that can reach full output in 10–15 minutes after a start command
• Large commercial and industrial loads that can curtail within 30 minutes in response to an emergency notification — this demand response counts as non-spinning reserve in many RTOs

Voltage Support

Transmission systems also need reactive power to maintain voltage at acceptable levels. Reactive power doesn't do useful work in the same way active power does, but without it, voltages collapse and equipment trips. Generators, capacitor banks, and STATCOMs provide reactive power support — usually as a regulated obligation rather than a market product, though some RTOs have developed markets for it.

The Market for Reliability

Modern RTOs operate sophisticated markets for all of these ancillary services, generally co-optimized with the energy market to minimize total procurement cost. A generator that's particularly valuable for frequency regulation (because it can respond quickly) will be priced accordingly. A battery storage system might earn more from regulation service than from energy arbitrage.

This co-optimization creates important efficiency gains: resources are assigned to the services they provide most cheaply, rather than being allocated by administrative rules.