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Bringing Batteries to the Helm of Grid Services

Promises of India’s Draft Ancillary Services Regulations

This article was co-authored by Jagabanta Ningthoujam

India’s electricity market has undergone several changes in recent years. The share of variable renewable energy in the generation mix has increased, the market has seen the consolidation of a single, synchronous national grid, and there has been a heightened emphasis on reliability and stability of system operations. But as the share of renewable energy rises to meet decarbonization ambitions, there is growing impetus for the system operator to maintain and diversify grid balancing resources.

Traditionally, most of these functions were provided by hydro and thermal plants. But increasingly, we foresee the role for distributed resources like battery energy storage systems (BESS) and demand-side resources to provide grid operation services necessary to maintain power quality, reliability, and security—services collectively defined as “ancillary services.” In this regard, the Central Electricity Regulatory Commission (CERC) recently announced draft regulations that take a step in this direction to expand the scope of ancillary services.

Evolving Grid and the Need for “Faster” Ancillary Services

The Indian electric grid operates at 50 Hz, or 50 cycles per second, with a small range of permissible deviations from that frequency. When more significant deviations occur due to sudden generator outages, Frequency Support Ancillary Services (FSAS) are required to bring more capacity online and restore grid frequency within the permissible band. Currently, operators only use slow tertiary frequency control (with a response time frame in the range of 15–60 minutes) to restore grid frequency via the Reserve Regulation Ancillary Services (RRAS), which was operationalized in 2016.

Although the grid has come a long way in restricting large frequency deviations over the previous decade, RRAS are still prone to reserve shortages during peak demand hours due to very narrow eligibility criteria to participate in these services. The grid’s evolving needs require an adequate number of fast-responding providers to offer balancing services.

Toward a Market-Based Ancillary Services Framework

Globally, these services are provided through market mechanisms that ensure competitive procurement and expand the pool of participants to the most efficient providers. Ancillary services markets in UK, for example, procure reserves through an auction process that leads to lower costs for the system operator. The California (CAISO) market also procures reserves and regulation services through competitive bidding by generators on the power exchange. In addition, BESS and demand resources are allowed to participate in ancillary service markets in Australia, parts of Europe, and the United States.

India, however, still has a nascent ecosystem that relies on regulated pricing mechanisms to procure these services. With increasing liquidity and transition to a real-time market, India has an opportunity for more robust grid management by promoting and incentivizing BESS technologies to compete to provide grid support services.

Energy Storage Enters the Mix

The draft regulations expand the scope of procurement of quicker-responding secondary and tertiary reserves, required for balancing real power demand and supply on the grid, to entities with BESS or demand-side resources via regulated mechanisms and via the spot market through power exchanges. This has a dual benefit of ensuring more reserves become available to meet the increasing balancing needs of the grid, while also providing an even break to new technologies participating in the market. Opening up the ancillary services market to these technologies could be the first step in realizing their value proposition.

Realizing the Real Value of Energy Storage

A technology-neutral ancillary services market constitutes the first step toward the next generation of grid support services. The draft regulations are certainly promising, as they propose a market-based mechanism for BESS to participate in grid operations. But looking at it from the purview of enabling the economics of BESS, it is only part of the puzzle.

First, BESS technologies can offer multiple value streams beyond renewable energy integration and ancillary services, including energy arbitrage, congestion management, and transmission and distribution deferral. It is important to stack all these benefits to assess the total value to the power system. A system-level, detailed techno-economic assessment is therefore required to determine which use cases may be most attractive from a revenue standpoint. As the capacity share of renewable sources increases in India’s grid, lower system inertia would require frequency control through providers that can respond within a fraction of a second, making this a potential primary use case. Enabling multiple value streams will also improve the economics of BESS in the near term, when technology costs are still relatively high.

Second, assessing the techno-economic value to the grid has links with clarity around regulatory issues  with ownership of such assets and operational frameworks associated with them, depending on specific applications. Clarity on permitting and performance metrics can allow markets to capture maximum value and present a viable business case to investors. The performance of energy storage should be evaluated on the basis of greater speed and accuracy of response for frequency regulation, or a broader range of available capacity for regulating reserve applications. Compensation should thus account for this higher quality of service. The draft regulations include measuring performance based on accuracy for secondary reserves, which is a step in the right direction.

Lastly, the real challenge of market creation is not just in the design but also in ensuring adequate participation. It is critical that participating agencies, most importantly power distribution companies (discoms), receive capacity building to ensure that there is substantial participation in the markets. The Power Grid Corporation of India Limited’s Puducherry BESS Pilot is a crucial on-ground implementation that provides insights into the usability of energy storage for several grid support applications. Lessons from more such pilots and global best practices can serve to inform development of scalable, grid-level implementation roadmaps.

As India moves toward an increasing share of renewables, the need for grid modernization and the correct valuing of new flexibility resources like BESS are becoming critical. This forward movement in the ancillary market signals the right intent and opportunity toward shaping the power market of the future.