The economics of different generation technologies for frequency response provision

Abstract

The provision of reserve generation is an essential part of maintaining a reliable electricity system and has become an increasingly difficult task with the growing contribution from variable energy sources. Ensuring the cost of balancing supply and demand is minimised is an important aspect, requiring an understanding of how generator costs vary depending on their operation. This paper considers the cost of part loading different generator types, providing a cost breakdown and description of the Levelised Cost of Electricity method of analysing generator costs. This delivers cost-loading level curves for the generator types with the largest contribution to the UK generation portfolio which can be used to perform economic optimisations for generator scheduling. The holding payment for provision of frequency response, an aspect of maintaining balance between generation and demand, is separated by generator type and compared with the calculated part loading costs. To demonstrate the effect on system costs the Winter peak and Summer trough in 2016 and the Future Energy Scenarios in 2020 are considered with maximum and minimum generator numbers connected. Provision of sufficient generation to meet demand and reserves are optimised to reduce costs in each scenario.