Energy storage for the provision of a secondary frequency control service: Evidence in the Colombian market

Abstract

In this article, we evaluate three alternatives for incorporating storage systems in the secondary frequency control service in the Colombian energy market. The first method is to maintain the current auction mechanism linked to the energy offer but including BESS in competition with established generators. The second is to implement mid-term auctions for services providing both generators and Battery Energy Storage Systems, while the third alternative suggests the adoption of long-term auctions with BESS remuneration based on the rate of return methodology. These long-term auctions operate in conjunction with the well-established framework for service provision, utilising generation assets. Based on our results, the latter two alternatives exhibit superior efficiency. Compared to the current scheme, these alternatives have the advantages of: improved efficiency in price forming, minimum impact on the energy market, and decreased service costs. Whereas the annual remuneration under the current mechanism amounts to USD 105 million, alternatives achieve savings from around 7% (only for 50 MW of reserve provision with BESS) to 50% (100% BESS service provision), related to current service costs. This means annual savings of up to USD 62 million. In any of these systems, the operation efficiency is increased, since battery energy storage systems are devices with faster response times to frequency changes.