Provision of ancillary services by dispersed generation and demand side response - needs, barriers and solutions

In Europe the Dispersed Generation (DG) based on renewable energy sources (RES) and cogeneration of heat and power (CHP) is mostly operated without remote control mechanisms, feeding-in a maximum possible power corresponding to the political and regulatory framework. The further increase of DG which is aligned with the goals of the European Commission will increase their share in the peak power balance up to 60% by 2010. This requires innovative approaches to keep the security and the sustainability of the power system operation. The contribution of DG to the provision of ancillary services will become mandatory. Today the Transmission System Operators (TSOs) are obliged to manage and operate the electric power transmission grids for which they rely on ancillary services procurement from the free market. The TSOs will remain responsible for the transmission system also in the future, but more and more services will be provided at the distribution level including frequency stability with its components: primary, secondary, and tertiary control power balancing and dispatch voltage stability restoration of supply after disturbances The TSO cannot efficiently manage ancillary services provided by thousands of DG units with only a small contribution of each. Therefore, the provision of system services by DG requires innovative technical solutions in the sense of virtual power plants and new organizational and regulatory frameworks. Starting with a brief description of the potential of DG to contribute to ancillary services, the paper then describes the needs and the challenges of the DG participation in the ancillary market. The main barrier for such participation is the fixed price practice for energy from RES and CHP. An adapted model for energy prices from RES and CHP is proposed, which allows to maintain subsidizing while enabling their market participation in parallel. Finally, the needs of further development of regulatory frameworks in the European context are described.