The energy market is complex. Lucy Carpinelli, Solution Architect at Evergen explains Frequency Control Ancillary Services (FCAS) and why they are so important in the energy market.
1. So what is FCAS?
FCAS are Frequency Control Ancillary Services.
Electricity in the grid flows at a frequency of 50 Hz. Maintaining this frequency is essential to the safe operation of the grid. If demand and generation aren’t carefully matched, the frequency will deviate. This is dangerous, so the grid is closely monitored and deviations in frequency rapidly corrected by changing either generation or offtake activity.
If you are a provider of FCAS, in return for payment, you will agree to keep your asset ready to respond if the frequency on the grid gets too high or too low.
2. How do ‘assets’ provide FCAS?
Quite recently, FCAS was provided chiefly by large assets on the grid, like power plants or the biggest electricity consumers, such as aluminum smelters. More recently, other grid-connected assets have started supplying FCAS, including wind and solar farms and utility scale batteries like the Hornsdale Power Reserve (aka ‘the Big Battery’) in South Australia.
Furthermore, groups of small assets like household batteries, rooftop solar and even aggregated demand response (essentially, turning stuff off) have also been used to provide FCAS. These groups of assets are also called Virtual Power Plants (VPPs).
3. How does it work?
Assets are bid into FCAS markets on the basis that they can provide either a frequency lowering service (by offtaking from the grid) or frequency raising service (exporting to the grid).
The Australian Energy Market Operator (AEMO) is responsible for securing FCAS and their platform manages a daily bidding process and awards FCAS enablement to the best priced offers on a day ahead basis.
Assets that have been enabled for FCAS need to be on stand-by for a frequency excursion, that is, if the frequency goes above 50.15 Hz (for the frequency lowering assets) or below 49.85 Hz (for the frequency raising assets.) The frequency may be perfectly stable within these operating limits (which it usually is), in which case the asset owners earn the FCAS fee simply for being on stand-by.
4. How much money is made providing FCAS?
AEMO spent $81 million on FCAS in Q4 2019. The FCAS price can vary from 1 cent a MWh to $14,000 a MWh. Most FCAS revenue is earned during sporadic events, such as when a power plant goes down unexpectedly or demand peaks on hot days causing instability in the grid.
5. Who is buying?
AEMO operates the FCAS market, ensuring there is sufficient FCAS capacity enabled to support the stability of the grid. However, FCAS costs are charged back to generators and retailers, who ultimately pass the cost back to consumers.
6. What does this mean for consumers?
As Distributed Energy Resources (DER) and especially VPPs become more prevalent there is finally a way for consumers to share in the upside of supporting the grid.