IEEE Power & Energy Magazine - March/April 2021 - 87

✔ The quantification of the service requirement: This

is critical for market-based approaches but also relevant
for regulatory approaches. While this may be carried
out for some system requirements, such as relating to
the co-optimization of inertia and frequency response,
it is challenging for other emerging security phenomena, again, such as system strength in weak grids. In the
latter case, simple standardized metrics fail to capture
the technical issue in its entirety while more accurate,
dynamic simulations are computationally intensive and
highly sensitive to changes to assumptions on operating
conditions, power flows, and power system parameters.
Thus, there is a tradeoff between the accuracy of the
condition and quantification for dispatch, connection,
and planning purposes. Furthermore, even if modeling
is possible, there is a social question of how much to
procure, e.g., from minimum procurement to a full procurement that supports 100% renewables.
✔ Price formation: Pricing and cost allocation need to be
granular enough to reflect the technical scarcity but also
understandable enough for contracts to be created from
it. As outlined previously, certain system services, such
as inertia and system strength, are dependent upon unit
commitment rather than generation dispatch. Because
of its binary nature, unit commitment creates nonconvexities in a centralized scheduling optimization. This
makes shadow prices and, therefore, locational marginal pricing less meaningful. Some designs are looking

into adopting linear relaxations of the integer products
to obtain meaningful pricing of inertia. In other markets,
the challenges of revenue inadequacy flowing from centralized unit commitment have relied upon " uplift and
clawback " side-payment frameworks and upon alternative price formations for energy, such as convex-hull
approximations, to minimize those uplift payments. It
also means that for thermal generator factors such as
the minimum stable generation level, start-up and shutdown costs and no-load cost become increasingly important. This is an important open research topic in the
context of new security services.
✔ Market depth and liquidity: In the consideration of
market frameworks, a key question emerges as to
whether sufficient depth and liquidity can be created
in system service markets to allow for vibrant competition. Especially as it relates to local system parameters, such as voltage, reactive power, and system
strength, the potential for the exercise of market power
in relation to pricing needs to be carefully considered.
This is even more important in the context of services
that can affect other markets, too, as discussed previously. The perception of market power may also dissuade competition and result in a barrier to new entry.
✔ DERs: DERs have an important role to play in the
provision of system services through the provision of
bottom-up grid-flexibility services. While wholesale
frameworks would ideally be technology and provider

table 2. Examples of different possible mechanisms to procure security services
(adapted from Billimoria et al., 2020).
Mechanism

Description

Examples

Mandatory
licenses

Mandatory conditions imposed on
connection licenses to provide or
contract for system services

*
*
*
*
*

Regulated
procurement

Responsibility delegated to regulated * Minimum system strength and inertia levels (NEM)
network monopoly to provide system * " Delivering a Secure, Sustainable Electricity System " (DS3) System
Services Regulated (Eirgrid, Ireland)
services, procured either through selfbuild or contracting

Central agency
delegation

Responsibility delegated to a central
agency (such as an independent
system operator) to procure system
services via bilateral contracts or
organized auctions

* System integrity protection schemes (NEM)
* Network support and control ancillary services (NEM)
* System stability, voltage, and network pathfinders (National Grid
United Kingdom)
* Enhanced frequency response (National Grid United Kingdom)
* DS3 Service Tender (Eirgrid, Ireland)
* Enhanced Reactive Power Service (National Grid United Kingdom)
* Megavolt amp of reactive power services tender (Belgium)

Spot markets

Short-term operational spot
markets for system services, often
co-optimized with system risk limits

* Fast regulation markets (PJM, Midcontinent ISO)
* Ramping products (California ISO, Midcontinent ISO)
* Primary frequency reserve (Wholesale Electricity Market-Western
Austral, proposed)

Market
constraints and
interventions

Direct operator intervention or
imposition of constraints on system
resources to maintain a secure
operating envelope

* Residual unit commitments (United States)
* Market intervention/directions (NEM)

Virtual inertia provision (Quebec, Ontario)
Primary frequency control (NEM, National Grid United Kingdom)
Mandatory system reserves (Spain)
" Do no harm " generator technical requirements (NEM)
Obligatory reactive power service (National Grid United Kingdom)

ISO: independent system operator.

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