Towards the commercialisation of the balancing reserve: technical, organisational and legal requirements

What contracts must be concluded in order to provide balancing power?

A direct marketer cannot offer balancing reserve in Germany solely on the basis of a direct marketing contract with the plant operator. It must itself be authorised as a balancing reserve provider. According to regelleistung.net, any party that has concluded a valid framework agreement for the provision of balancing power with at least one transmission system operator (TSO).

Pre-qualification is not carried out by just any TSO, but by the TSO in whose control area the relevant technical unit – e.g. a wind farm or a battery – is connected to the grid. This applies regardless of the voltage level.

In practice, this means: For installations in the control area of TenneT, Amprion, 50Hertz or TransnetBW in each case, the relevant connecting TSO is decisive for the pre-qualification and the framework agreement.

The framework agreement is a key legal requirement for market access. Vattenfall will fulfil this requirement in the three control areas: 50Hertz, TenneT and Amprion.

What contracts are required – apart from the framework contract for balancing power?

Furthermore, the marketing of balancing reserves requires a multi-year direct marketing contract, as the labour and resources expended over several months by the direct marketer and the plant operator must be recouped through a contract term of an appropriate duration. Although the marketing of balancing reserve is, in principle, also possible without a direct marketing contract, it introduces additional complexity into the processes, particularly when reporting unavailability.

Therefore, a marketing contract for control reserves must also be concluded. This contract sets out the obligations of the wind farm operator and the direct marketer, in particular provisions regarding notifications of unavailability and redispatch in the event of overlaps with a control reserve call-off. In addition, commercial aspects relating to revenues – in particular the distribution of revenues and revenue shares – as well as costs for hardware, communications and the security of the wind farm are regulated, including the consequences of unavailability in the event of a call-off by the transmission system operator.

What types of control power are there?

The following types of control power exist:

• Primary control power or Frequency Containment Reserve (FCR): automatic, very rapid activation as soon as the frequency fluctuates; high demands on measurement and response behaviour
• Secondary control power or Automatic Frequency Restoration Reserve (aFRR): automatic activation based on a setpoint specified by the TSO, full activation within five minutes
• Minute reserve or Manual Frequency Restoration Reserve (mFRR): manual activation, full provision within 12.5 minutes.

You can find out more about control power here: What is control energy?

What are the technical and organisational requirements for pre-qualification?

Before taking part in tenders, the supplier must demonstrate in the pre-qualification procedure that it meets the requirements for providing the relevant type of balancing reserve using the corresponding technical unit, e.g. a wind farm.

This includes, in particular, the determination of marketable output, technical controllability, measurement and verification capabilities, an IT and service delivery concept, a trial run and a control system test with the connecting TSO.

It is precisely these work packages that constitute the bulk of the work, which can only be managed through joint teamwork between the plant operator, direct marketer and system operator. To this end, all parties involved must plan for sufficient resources and staffing capacity in advance. In particular, establishing redundancy in the IT systems and the control-system connection to ensure reliable control of the plant requires a considerable amount of coordination and effort.

What costs and revenues can be expected?

In terms of the costs to be invested, there are one-off costs in the low five-figure range for hardware, as well as monthly costs in the mid-four-figure range for the dedicated communications line. These costs are relatively low compared with the expected revenues from the balancing power market.

Wind farms can be pre-qualified for positive and negative secondary control reserves as well as minute reserves. Revenues are generally generated in the control power market – i.e. for the provision of power – rather than in the negative control work market – i.e. from the actual performance of control work.

Published revenues and surcharges in the control reserve market can generally be traced via the publicly available tender results, e.g. in the data centre of regelleistung.net. However, they do not guarantee the individual revenue of a specific wind farm.

Actual revenue also depends on:

• pre-qualified capacity,
• the volume awarded,
• product type and control direction,
• plant availability,
• actual call-offs,
• bidding strategy,
• opportunity costs relative to day-ahead and intraday trading,
• technical constraints and unavailability.

In future, revenues achievable via the control reserve market are likely to decline as more wind farm and battery providers make their secured capacity available.

Only once all the above-mentioned evidence has been successfully provided can the technical unit be pre-qualified for the relevant type of control reserve and subsequently deployed in control reserve trading.

How long does the pre-qualification process take?

The pre-qualification process takes several months and is complex due to the large number of technical, organisational and communication interfaces involved. It should therefore be set up as a structured project and supported by appropriate project management tools or software. In addition to clearly designated project leadership, tasks, responsibilities, deadlines and progress status should be transparently documented for all those involved and accessible at all times

Do you have any questions about pre-qualification for the provision of standard services? Please feel free to get in touch with us!

<a class="arrow">renewables@vattenfall.de</a>

You can find further information about our services here:

• Direct Marketing
• Redispatch

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