An option evaluation model for ancillary and balancing services

A new idea for ancillary and balancing services evaluation, based on a financial option analogy is presented and applied to a major real power network. The model requires as a prerequisite computing the system available capacity as well as the excess demand function. This method provides a systematic and consistent way to deal with the ancillary service evaluation, moreover utilizing well-established power system data. A single function is utilized that allows pricing of both balancing and regulation, and simplifies dealing with these services from an Independent System Operator ISO or Regional Transmission Organization RTO standpoint. It can also help players ascertain the market value of their assets through a straight forward evaluation process.