Ancillary Services
According to the Electric Utilities Act, ancillary services can be defined as "those services required to ensure that the interconnected electric system is operated in a manner that provides a satisfactory level of service with acceptable levels of voltage and frequency."
These services include Operating Reserve, Transmission Must-Run, Blackstart, and Load Shed Services for imports.
Operating Reserve
Power supplied must always be equal to power being consumed.
Operating Reserves are used to maintain system reliability when there is an unexpected imbalance between supply and demand due to various system conditions or contingencies. Operating Reserves can be provided from unloaded capacity at a generation facility or from a curtailable load that can be dispatched on short notice to maintain system reliability.
Read more information on the Operating Reserve market and how to participate.
Transmission Must-Run service
Transmission Must-Run is generation required to be online and operating at specific levels in specific locations of the Alberta Interconnected Electric System to help meet the local demand when transmission capacity is insufficient to support the local demand or guarantee system reliability. The AESO contracts generators to provide this service.
Read more information on Transmission Must-Run generation.
Blackstart services
Most large grid connected generation facilities are unable to self-start. In the event that the electrical system went black, the system would require generators with the ability to self-start to re-energize the transmission system. The AESO contracts with some generators that can self-start and are able to re-energize the transmission system.
Read more information on Blackstart services.
Load Shed Service for imports
Load Shed Service for imports (LSSi) are provided by market participants that agree to reduce load following the sudden loss of imports over the interties. LSSi is used to manage frequency risk so that import intertie capability can be increased, allowing additional scheduled imports to access the Alberta market without compromising system reliability. The AESO contracts with loads to provide LSSi.
Read more information on how we use Load Shed Service for imports.
Fast Frequency Response
Fast Frequency Response (FFR) is a fast-acting transmission reliability service that will facilitate the arrest of, and recovery from, frequency decay caused by events such as the sudden loss of imports from the Alberta—B.C. Intertie and the Montana—Alberta Tie Line. While this service is currently provided by load through LSSi, the AESO has identified an opportunity to use new technology to provide response to facilitate system recovery when events occur. The AESO is launching a pilot project targeted at procuring services from any new technology capable of meeting FFR technical and eligibility requirements.
Read more information about Fast Frequency Response, and the Fast Frequency Response pilot project.
Frequently asked questions
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1. How are ancillary services procured?
This depends on the type of ancillary service. Operating Reserve is procured over Alberta Watt Exchange Limited (Watt-Ex), a day-ahead online trading platform. Other ancillary services are procured using contracts.
The AESO is committed to using a competitive procurement process for ancillary services whenever possible.
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2. How do I get paid for providing operating reserve?
For Operating Reserve procurement facilitated through Watt-Ex, the AESO receives an invoice from, and financially settles with, Watt-Ex. Watt-Ex then facilitates the settlement process with individual OR service providers.
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3. What is NGX/Watt-Ex?
NGX stands for Natural Gas Exchange. They are the organization that operates Watt-Ex – the trading platform that is used to procure operating reserve.
For more information on NGX visit their website.
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4. What is equilibrium pricing?
Equilibrium pricing is used in the procurement of active Operating Reserves that are transacted through Watt-Ex. Also known as the trade price, the equilibrium price is the average of the bid and the marginal offer.
Equilibrium Price = (Bid + Marginal Offer)/2
The marginal offer is the offer that satisfies the volume of Operating Reserve required. For example if 100 MW of reserve is required and the offers for the reserve were:
Offer
Price
Volume (MW)
Aggregate Volume (MW)
1
-$10
10
10
2
-$5
30
40
3
$0
40
80
4
$5
10
90
5
$10
10
100
6
$15
25
125
7
$20
30
155
Then the marginal offer would be $10 (Offer 5). That is the last offer that satisfies the final volume required to make up the 100 MW of volume. In this example the aggregate of offers 1 through 4 sum to 90 MW (which is 10 MW short of the required 100 MW), then offer 5 (10 MW) combined with offers 1 through 4 sums to 100 MW, which is the required volume. Offer 5 was the offer that filled the final portion of the required volume and therefore it is considered the marginal offer.
The bid is the maximum price that the AESO is willing to pay for the reserve. The equilibrium price then calculates an average between the difference of the AESO’s bid and the marginal offer. The equilibrium price is then used to calculate what the reserve providers receive as payment for their reserves. All providers receive the equilibrium price plus the hourly pool price for the period they are providing.
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5. How are premium and activation prices for standby reserves determined?
The premium price is the price per MW that a stand-by Operating Reserve provider is paid for making reserve power available for a possible dispatch. The activation price is the price per MW a stand-by Operating Reserve provider is paid if the reserve made available is dispatched.
The AESO clears the standby market using a blended price formula, which ranks the standby offers based on the following algorithm:
Blended Price = Premium + (Activation % x Activation Price)
Activation percentages are based on historical product activation rates for on and off peak hours.
In the standby market, sellers submit offers with an activation and premium price. Offers are ranked based on the blended price, and the lowest blended priced offers are accepted until the AESO’s volume requirements are satisfied.
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6. Can all products be traded using Watt-EX?
All Operating Reserve products are traded on Watt-EX. Other ancillary services are typically procured using a competitive process. (See “How are ancillary services procured?”above)
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7. What is considered on-peak, off-peak, AM super peak, and PM super peak?
The AESO procures Operating Reserves using four different time blocks. We refer to a period of time in the context of hour ending using the 24 hour clock. For example, the period of time 5 p.m. to 6 p.m. is referred to as HE18 (HE=hour ending), and 1 a.m. to 2 a.m. is referred to as HE2.
The four different time blocks are:
- On-peak: HE 8-23
- Off-peak: HE 1-7 and HE 24
- AM super peak: HE 6-8
- PM super peak: HE 17-24 in November, December and January and HE 18-24 in all other months
These definitions apply to all seven days of the week.
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8. How do I get a Transmission Must-Run contract?
Given the location-specific nature of Transmission Must-Run generation, only a small number of units in Alberta are needed to provide this service. The AESO contracts with these units when long-term requirements are identified.
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9. How are prices determined for Transmission Must-Run contracts?
Contracts are negotiated on a case-by-case basis and the terms and conditions of each contract, including price are set at that time.
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10. What is the WECC?
The Western Electricity Coordinating Council (WECC) is the regional organization responsible for coordinating and promoting bulk electric system reliability in the western interconnection. WECC provides an environment for coordinating the operating and planning activities of its members. In addition, the volume of Operating Reserve that the AESO procures is determined by reliability standards set by WECC, of which the AESO is a member. For more information on WECC, please see their website.
