Proposal of a New Procurement Strategy of Frequency Control Reserves in Power Systems: The Italian Case in the European Framework

Abstract

Over the last few years, a strong penetration of Intermittent Renewable Energy Sources (IRES) has been in progress in the Italian power system. In this new framework, the dispatching activity must improve its efficiency to ensure adequacy and security of the national electricity system. European market integration initiatives are making this goal achievable, provided that the coherency of market price signals and reserve procurement at the European level are guaranteed. For this reason, the Italian Transmission System Operator (TSO), Terna, started to investigate the opportunity to align the Italian reserve-procurement approach to the one adopted in most European countries, procuring Replacement Reserve (RR) in dedicated auctions held in advance of the day-ahead market. The aim of this new methodology is to improve the coherency of price signals arising from the integrated European day-ahead market, anticipating potential scarcity conditions, thus helping to keep adequacy standards high. This paper describes the characteristics of a possible new reserve-procurement model based on the European benchmark. Comparative simulations are presented, estimating the impact of the new approach in terms of outcomes and costs of both the energy and ancillary services markets in Italy. The results of this study suggest activation of the reserve auction only in the cases in which the TSO expects a potential risk of simultaneous reserve scarcity across European countries.