Flow based activation of reserves in the Nordic power system

In the Nordic market, manually activated tertiary control based on bids for upward and downward regulation is used for system balancing. Although a system wide merit order list is used, the resulting regulation is suboptimal because of the congestion and the effect of losses, which are not taken into account. This paper proposes an algorithm for the dispatch of regulation resources based on an incremental DC optimal power flow formulation. The results of this model are compared with today´s practice for some cases of up- and downward regulation, and a potential for cost reduction is observed. However, the method requires Automatic Generation Control that is not in use in the system, although it is presently evaluated. Also pricing of regulation is an issue, because Location Marginal Prices probably are unacceptable to market participants.