Basic objectives of the ancillary markets and their valuation

Summary form only given. In this paper we first recall the objectives of ancillary services and the operating practices for their implementation in a fully regulated industry. We next pose the objectives of ancillary services for the electric power industry under restructuring and their dependence on the type of energy and transmission markets in place. The major point here is that the ancillary services cannot be designed independent of market structures for anticipated demands. What differentiates ancillary services from the basic energy markets is their role in responding to hard and/or impossible to anticipate conditions. In the regulated industry reserves were required to respond to variations in the equipment status, while the automatic generation control (AGC) and or automatic voltage control (AVC) markets were responding to the fast stochastic variations in demand conditions around the anticipated demand. While the AGC has been more widely implemented for automatic balancing of stochastic imbalances in real power supply and demand, a closer look into the AVC (France, Italy and Spain) shows similar use of AVC for balancing stochastic variations in reactive power supply and demand imbalances, and to consequently regulate voltages despite these unexpected variations.