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How Frequency Regulation can maximize your Demand Response revenue

How Frequency Regulation can maximize your Demand Response revenue

Many organizations are failing to unlock the full value of their flexible energy by ignoring the opportunities of the Frequency Regulation market.

Frequency Regulation is typically the most lucrative Demand Response (DR) program. It’s used by grid operators to finely balance supply and demand so that the power system runs safely and reliably.

The financial returns of Frequency Response can be accessed alone, or as an enhancement to your current demand response commitments; meaning you have the freedom to participate in a way that suits your business, adding more value. In this way, you can extend your existing DR portfolio to unlock greater even value from your generation, storage or load curtailment resources. 

Making the complex simple

Despite the opportunity to maximize DR revenue, many organizations are missing out on the opportunity because they believe Frequency Regulation is too complex.

Yes, it’s less straightforward than other DR programs, such as capacity demand response or sync reserve. Frequency Regulation generally needs specialized hardware, and extensive market interaction – often requiring communication with the grid operator every 2-6 seconds.  However, with the right technical support and market expertise, complexity is removed. As the saying goes: “anything worth having is worth fighting for,” but with a tech leader like Centrica Business Solutions in your corner, the process is painless.

Centrica Business Solutions is a global Demand Response leader with 5.0GW of flexible assets under our expert management. For the past ten years we’ve provided end-to-end support to enable North American organizations to unlock the full value of their flexible energy resources. With our expert support they are optimizing revenue via participation in the full range of DR programs, including Frequency Regulation. We offer the potential to monetize flexibility, worth an average $100k per MW per year.

What is frequency regulation?

Balancing Authorities and Independent System Operators must ensure perfect real-time balance of supply (generation) and demand (load) across the regional power networks – to prevent equipment damage and energy supply disruption, such as brownouts or blackouts. This involves maintaining a power frequency of all synchronous generators at very close to 60Hz (60 cycles per second) at all times.

If demand is greater than generation, system frequency falls, while frequency rises if generation exceeds demand.

Much of the balancing is handled ahead of time, but there are always small mismatches close to real-time, such as a generator producing less power than expected. In these instances, system operators turn to the Frequency Regulation market, in which participants are incentivized to change the output of their energy assets to keep the grid balanced.

Are there regional differences?

The critical 60Hz frequency level applies across 3 separate North American grids (East, West and ERCOT, which covers most of Texas). Within each grid (also known as interconnections), there are 74 Balancing Authorities, who are tasked by the federal agency (NERC) to ensure alignment of supply and demand.

They use a variety of tools, including calculating the area control error (ACE), which is the second-by-second difference between the scheduled electricity demand and what is actually generated. If ACE deviates from zero, this indicates that frequency deviations are likely, and that resources in the frequency regulation market must be deployed to modulate output.

What resources can deliver frequency regulation?

Frequency regulation was traditionally controlled by making small adjustments to the output of centralized generators. The big shift to decentralized power production, comprising lots of smaller, lower carbon generators, such as solar, combined heat and power (CHP)/cogeneration, and battery storage, has made the balancing act more complex.

It has, however, created a new market opportunity for organizations to earn an attractive income from their distributed energy assets. Technological and commercial innovations have opened up the high value Frequency Regulation opportunity to battery storage, advanced load curtailment and other onsite energy resources.

Are there different types of frequency regulation?

Yes. For example, in some markets there are multiple ‘signals’ according to the speed of response to market signals and the duration resources are capable of participating. Both types work together to maintain frequency within the required tolerances, with the fast response resources addressing the immediate deviation, then the slower, longer acting resources taking over to recover larger or longer frequency fluctuations.

If we look at PJM, which is the biggest system operator, the two types are:

  • Regulation A, which is a slower-moving signal for resources that take some time to ramp up or down, but can deliver over long periods. This is suitable for onsite generators or large energy consuming assets.
  • Regulation D is the faster-moving signal for resources that can provide a split-second response, but can’t provide energy indefinitely. Battery storage is ideal.

How is frequency regulation compensated?

Frequency Regulation compensation differs across markets, but is typically the highest value DR market opportunity. For example, PJM offers two payments:

  • A capability credit, which is a $/MW payment for the grid operator to ‘reserve’ the use of your resource for possible future use. This is comparable to the capacity payment from Capacity Demand Response programs.
  • A performance credit, which is the $/MW payment for the frequency regulation service actually delivered. This is comparable to the energy payment from Capacity Demand Response programs.

Payment is by performance, so the fastest, most accurate resources, such as batteries, which provide an almost immediate response to signals, gain the highest compensation.

Demand Response innovation

Centrica Business Solutions has taken fast response Frequency Regulation to a new level in Europe, where we have used our advanced technology to combine battery storage and industrial load within a 32MW virtual power plant. This has created an ultra-fast, agile portfolio that optimizes revenue from both energy assets. It provides a high value opportunity for slower responding industrial load assets that wouldn’t, otherwise, be possible.

How can Centrica Business Solutions help?

We can manage your end-to-end Frequency Regulation process as part of a wider Demand Response strategy. This is designed to unlock the best value from your energy flexibility, while ensuring business continuity.

We take the complexity out of Frequency Regulation. Our experts work with you to define operational boundaries for all flexible assets and implement a plan of action that maximizes value, while ensuring your processes are not impacted.

Our Internet of Things (IoT) PowerRadar® device-level monitoring and analytics platform informs your high value DR strategy, as well as helping to optimize your energy and operational performance.

We can manage complex market interactions with grid operators, while providing the technical solutions you need to make a success of your DR strategy.

Find out how Centrica Business Solutions can unlock the highest value from your energy flexibility through our expertise in Frequency Regulation and Demand Response.