IEEE Power & Energy Magazine - March/April 2021 - 86

one good is procured affects the other. This introduces
new questions for markets and regulation. Are some
products to be procured separately or together, i.e., are
they individual products or super products? Should participants be compensated for the provision of one product when scheduled for the other? This underscores the
complexity of situations where system services have
different characterizations but are inseparable. For example, in South Australia, synchronous generators have
been directed by AEMO to commit and generate at
minimum levels to contribute to local system strength;
however, they also provide system inertia at the regional level. This obviously may have an impact on other
technologies that, in the future, might compete to provide this service. Furthermore, as inertia is also linked
to frequency-response requirements, these services will
also be indirectly affected by the requirements for system strength and the relevant provision.
✔ The binary nature of provision: The provision of certain system security services is based on binary response. In other words, they depend on whether the
unit is synchronized with the system. The unit provides its full response if it is synchronized and zero
if it is not. These responses do not scale up or down
with the level of generation, which is important for

approaches to commitment (and therefore time-ahead
markets) and dispatch. Examples of binary services
are inertia, fault current levels, and system strength.
The binary nature of the service has significant implications for price formation.
✔ Product definition: Another key aspect to consider
is the definition of the product or service itself. In
fact, for a market product or good to be clearly tradable, it must be well defined and measurable. This is
relatively straightforward for a few services (e.g., active power services) but far from trivial in emerging
cases. For example, as we mentioned earlier, " system strength " is usually used as an umbrella concept
that refers to general stability considerations and has
been historically associated with a local fault current level. However, synchronous inertia also plays a
certain role, and it is not yet fully clear how emerging forms of instability are physically linked to these
parameters and others as well. Therefore, what is the
market product that we can trade when we talk about
system strength?

Market Development Versus
Regulatory Approaches

There are a variety of options available to policy makers to
manage power system security,
ranging from market mechanisms
such as auctions and spot markets,
Excludable
nonmarket mechanisms such as
mandatory license conditions and
Private Goods
Club Goods
regulated network procurement,
to operational mechanisms such
as constraints and curtailment.
Table 2 illustrates some relevant
exa mples f rom Australia and
around the globe.
The following considerations
Excludability Through
Curtailment Regimes
are relevant in deciding upon the
optimal approach for service proDynamic/Tertiary
Reserves
curement:
Rival
✔ Product standardization and
Nonrival
Fault Levels
uniformity: Market-based apPFR
Dynamic
Rival With
proaches rely upon the speciVoltage
Increasing
Secondary
fication of a standardized
Static Voltage
Congestion
Frequency
product that can be traded in
Response
a liquid and transparent manSubclasses of
Users May
ner and under a clear formuInertial
Impact the Value
lation. Commoditization reResponse
of the Product
lies upon a clear and accepted
Common Pool
Resources
definition of the service,
Public Goods
which for many emerging
system security phenomena
Nonexcludable
is not yet available, as previously mentioned for the case
figure 6. The economic properties of security services (adapted from Billimoria
of system strength.
et al., 2020).
86

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IEEE Power & Energy Magazine - March/April 2021

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