Auctions for ancillary services

Abstract This paper discusses the procurement of ancillary services in a competitive electricity market. The paper assumes the existence of an underlying market for energy and explains why this energy market must be accompanied by a market for ancillary services. ancillary services include services such as the provision of operating reserves and Automatic Generation Control (AGC) both of which can require infra-marginal generators to choose between supplying energy, or operating reserves and AGC. Ancillary services are crucial for the reliable operation of an electric power system under a regime of competitive generation. Structures for organizing competitive auctions for ancillary services are examined. Initial experience and potential pitfalls from a market using such auctions is also reported.