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From: Eric2/26/2024 8:34:36 AM
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Demand sites join big batteries in making most of new FCAS markets

Big batteries now dominate the provision of the frequency control ancillary services required to maintain power system security in Australia’s main grid but demand side services company Viotas says there is room for more players in the increasingly lucrative market.

February 26, 2024 David Carroll

Image: Viotas


Smart grid technology company Viotas said commercial and industrial demand sites like cement mills, cold stores and data centres can play a key role in the contingency frequency control ancillary services (FCAS) market as Australia deals with the flexibility issues that can arise from more renewables.

Contingency FCAS services have traditionally been provided by generators such as coal and gas plants but Paul Moore, Managing Director of the Australian arm of Ireland-headquartered Viotas, said demand response is perfectly suited to help address the challenge of keeping the power grid balanced as variable generation increases.

“In the traditional grid you had more seconds to respond to a contingency event (such as a generator tripping) but these days, with more renewables, the frequency changes very quickly,” he said. “This is due to a reduction in the rotating mass in the grid as thermal plant close down.”

To address the need for speed, the Australian Energy Market Operator (AEMO) introduced two new contingency services into the National Electricity Market (NEM) during Q4 2023, with the Very Fast Raise Contingency (R1S) service and the Very Fast Lower Contingency (L1S) markets commencing operation on 9 October 2023.

“Providing increasingly faster response required for these new markets to support increasingly renewable energy based grid is inherently hard,” Moore said.

“So far it’s only been big batteries and demand response that are capable of doing it.”

AEMO’s latest quarterly analysis of the Australian energy markets shows that batteries and demand response were the main providers of the very fast services, increasing their shares of FCAS market supply to 50% and 12% respectively in the December quarter. Virtual power plant (VPP) was the only other technology supplying this service.

Moore said the introduction of the new very fast markets – which require a one-second response time – has been a game-changer for the demand response sector, opening up new avenues of revenue generation.

In the first quarter of the very fast FCAS markets operation, the NEM-wide average price for one-second contingency raise was $18.3 per MWh, the highest out of all the FCAS services for the quarter, followed by one-second contingency lower at $18.1 per MWh. This trend has continued into Q1 2024 with even higher prices in R1S.

Moore said most of the value of the FCAS market has already shifted into that one-second response time.

“It’s following the trend that we saw in Ireland,” he said. “As more and more renewable energy comes into the grid, the value in the stability services moves to the faster-acting services.”

“About 95% of value is now in R1S, there’s another 2% in R6S, and the remainder sits across the slower two markets.” The slower markets being R60s and R5m.

Moore said Viotas, which opened its first international office in Melbourne in 2020, has just over 40 MW registered in the one-second markets and approximately 40 MW registered in each of the other three FCAS markets.

“All of our MWs are on-demand sites, industries like cement mills, data centres, cold stores and so forth,” he said, noting that the interconnected and locally controlled sites are able to respond within milliseconds of a change in grid frequency being detected.

“Our proprietary kit will detect that frequency drop locally and automatically trigger the response.”

“We are also looking at the viability of large-scale solar farms (1 MW and greater) at demand sites also participating in the market.”

It is that rapid response time that is paving the way for demand sites to participate in the very fast FCAS market.

“A lot of industrial customers have a perception of demand response as needing to shut down equipment for the afternoon, minutes to hours at a time, but Very Fast FCAS is very different,” Moore said. “The outage is actually a very short duration, and very infrequent. With most of the revenue in the 1-60 second timeframe, you can leverage the service without any interruption to your plant operation in many cases.”

The success of the very fast FCAS services has prompted speculation that the market operator will introduce even faster markets, something that Moore said is possible.

“We’ve seen it happen in other jurisdictions, even from the time they announced the new market to actually implementing it, it got faster,” he said. “So it’s not a giant leap to suggest or speculate that there’s likely to be faster responses in future.”
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