Cost-based models for the power-reserve pricing of frequency control

One of the tasks of the system operator (SO) is to control the frequency of the system within defined limits. In order to do this, the SO has to provide enough power reserves which can be provided on the basis of bilateral contracts or on the relevant competitive market. In this paper, several methods for the power-reserve pricing of frequency control are presented. These methods are well suited to small power systems, where an insufficient number of potential bidders makes an ancillary-services market difficult to organize. The proposed pricing methods are meant for estimating the annual costs for power-reserves provision when these reserves are provided on the basis of bilateral contracts. The proposed pricing methods are applied to the Slovenian power system.