Secondary_reserves

Secondary reserves Introduction Because electricity is a product that can’t be stored as such, there must always be a balance between injection (production & import) and offtake (load & export). Maintaining this balance ensures that the frequency remains at 50 Hz. Secondary reserves are one among the resources Elia has to balance its zone, being Belgium.

The secondary reserves are reserves that are activated automatically based on imbalances of the Belgian zone.

Elia transmits a dynamic and continuous setpoint from its control center to the participating suppliers, who alter their production automatically based on this setpoint. This alteration will help to restore the balance in the Belgian zone.

There are two types of regulation: ● ●

Upwards regulation: Elia can ask to produce more electricity than scheduled Downwards regulation: Elia can ask to produce less electricity than scheduled

All suppliers of secondary reserves are activated simultaneously and pro rata based on their selected capacity of secondary reserves (see selection).

Reservation of capacity and Free bids 1

Contracted capacity: In order to guarantee a good regulation, Elia requires a total capacity of 140MW upwards and downwards secondary reserves at all times. Therefore Elia contracts a total capacity of 140MW at different suppliers who must make this capacity available at all times.

The capacities that are contracted, are split up: ● ●

for upwards and/or downwards regulation 2 per tariff period: peak/ off-peak

When a supplier is not able to make the contracted capacity available for a certain amount of quarter hours, he has the possibility to transfer his obligation to another party - who has a contract for secondary reserves with Elia - via the daily secondary market. Therefore both parties must agree bilaterally and communicate the transfer and the period for the transfer to Elia.

Free Bids: All parties that have signed a contract for the provision of secondary reserves with Elia (even with a reserved capacity equal to 0MW), can voluntarily offer, day-ahead, a (extra) volume of secondary reserves for the next day.

For the activation, Elia will select the cheapest offers(see remuneration and selection)

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Required volume for 2012 and 2013 Peak hours: from 8h to 20h, Monday till Friday Off-peak hours: from 20 h to 8h and from 8h to 20h during the weekend |Page1 of 5

Selection of Secondary reserves Day ahead all suppliers must provide Elia with prices for the activation of the secondary reserves for every quarter hour. ●

Obligation: suppliers which have contracted capacity must submit the volumes that will be made available and their corresponding activation price (This volume will be increased/decreased with the quantity of obligations transferred on the secondary market)

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Free bids: suppliers which have a contract for secondary reserves may voluntarily offer additional volumes with a corresponding activation price

Elia will make a selection of all offers based on an economical ranking, until the capacity required for upwards and downwards regulation is achieved. ● ● ●

The selection is done separately for upwards and downwards volumes The selection is done for every quarter hour.

Economical ranking: o Lowest prices for upwards regulation (Elia buys energy and pays money the supplier) o Highest prices for downwards regulation (Elia sells energy and receives money from the supplier)

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Activation For the activation, Elia transmits a dynamic and continuous setpoint from its control center to the participating suppliers, who alter their production automatically based on this setpoint.

The dynamic setpoint, represents the volume with which the supplier must increase/decrease its production. The supplier is required to keep the activated reserves equal to this signal. ● ● ●

The deviation of supplied reserves compared to the signal sent by Elia, should be smaller than 15% of the selected volume at all times The supplier must be able to provide the total selected volume, in the upwards or downwards direction, in 7,5 minutes. This defines the maximum slope for the requested activation.

The dynamic setpoint is updated every 10 second and takes into account the maximum slope of the unit.

Example: In the following figure Elia has sourced 10MW upwards at a supplier. ● ●

At time 0s, Elia requires 10MW upwards regulation. (red line) Elia will send a signal (dashed green line) to the supplier to activate the reserves. The signal will increase at a rate of:

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The activation of reserves (blue line) should remain in the orange band, which corresponds to a +1.5 and -1.5MW.

To realize this communication, a reliable data communication must be established between Elia and the supplier. (Elia and the supplier examine different possibilities)

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Remunerations Remuneration for the contracted capacity: Elia pays the supplier a fee per MW per hour for the year that the capacity is made available.

The provision of secondary reserves in 2012 was imposed via Ministerial Decree. For information purposes we like to mention that the prices imposed, were in the range of 32€/MW/h for the provision of upwards and downwards regulation.

For example: Provision of 5MW of upwards and downwards secondary reserves at similar prices would result in a yearly remuneration of 1,4mio€ for reservation only.

Remuneration for the activation: When a supplier is selected for a quarter hour (see below) he can be activated continuously and he will be remunerated for the Energy supplied: ●

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Upwards regulation: Elia requests the supplier to produce more electricity than planned. Elia will buy the extra energy produced from the supplier at the prices he offered the day before(see selection of secondary reserves). This price is generally higher than Belpex, with a maximum of 3 the generic fuelcost + 40€/MWh. Downwards regulation: Elia requests the supplier to produce less electricity than planned. Elia will sell energy to the Supplier of secondary reserve at the prices he offered the day before. This price is generally lower than Belpex with a minimum of 0€/MWh.

Some other mechanisms to keep the balance on European and Belgian level All the other mechanisms used and sourced by Elia are explained in detail on the website of Elia. (www.elia.be) Primary Reserves: To Balance the European network, every transmission system operator sources yearly primary reserves. These reserves are very similar to secondary reserves, however: -

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They are activated based on a local frequency measurement instead of a signal sent by Elia The activation time of these reserves is faster: when needed, a complete activation must be performed within 30sec

Generic Fuelcost: the fuel cost for producing 1MWh of energy of a typical CCGT with 50% efficieny |Page4 of 5