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Ancillary services help keep our power grid stable. How they work can get technical, complicated, and confusing. In this episode of Frequency Band, hosts Paul Dockery and Becky Robinson break down this vital topic with two leading industry experts.
Emma Nicholson, Energy Economist and former Senior Economic Advisor at FERC, joins Robin Hytowitz, Program Lead at EPRI, to share their deep knowledge of energy markets. Using analogies, they unpack how these essential services maintain grid reliability and balance the constant push and pull of electricity supply and demand.
From frequency response to ramping reserves, we explore the mechanisms that keep the lights on when grid conditions change fast. This episode offers lighthearted, thought-provoking insights into the systems stabilizing our energy future.
Creators and Guests
What is Frequency Band?
From Fort Peck, Montana to Tijuana, Mexico, the alternating current transmission network in the West oscillates in the narrow band of narrow band 59.97 and 60.02 cycles per second. On Frequency Band, the California ISO will host industry experts to talk about how the physics, economics, and governance of the grid come together to to keep the system in sync.
I'm Paul Dockery.
Becky Robinson:And I'm Becky Robinson.
Paul Dockery:On Frequency Band, Becky and I explore the physics, economics, governance of the grid from a system operator's perspective.
Becky Robinson:Joining Paul and I to talk about reserves on the margin is Emma Nicholson. Emma is a principal in the energy practice Charles River Associates in Washington DC. She holds a PhD in economics from Georgetown University and previously worked in the office of energy policy and innovation at FERC, and she was also FERC's senior economic adviser. Welcome, Emma. Glad to have you on today.
Becky Robinson:Thank you.
Paul Dockery:Anything else you want to say about CRA or, your bio?
Emma Nicholson:I'm a huge fan of wholesale electricity markets and ancillary services, so I'm excited to talk with you guys about the topic today.
Becky Robinson:We are happy to have you. And also today joining us, we have Robin Hytowitz Robin is the wholesale markets program lead at Electric Power Research Institute, better known as EPRI. She holds a PhD in engineering from Johns Hopkins and also worked in the office of energy policy and innovation at FERC. Welcome, Robin.
Robin Hytowitz:Thank you both for having me. It's a pleasure to be here. I'll give a quick disclaimer about EPRI for those who might be less familiar. We are a nonprofit institution. We are independent and a research organization.
Robin Hytowitz:As our name suggests, we do research on the electric power system, which really covers a wide variety of topics. Whenever I need I have a question about the power industry, I can always find an expert somewhere in our ranks. We are worldwide. We're now in 45 countries, and we have over 700 utility members and 300 other companies who are part of our fifty year legacy. So we're it's a pleasure to be here to talk about our research because part of our mission is getting our research out into the public.
Robin Hytowitz:So I'm I'm excited for that. Although we don't do research on some of what we'll talk about today, so I'm excited to get into analogies. But maybe we should.
Paul Dockery:This should there be more analogies in your research papers? That
Robin Hytowitz:is an analogy.
Paul Dockery:That's exactly right.
Emma Nicholson:Research questions.
Paul Dockery:So I noticed that both of you were in the Office of Energy Policy and Innovation at FERC. I'm curious, Becky, we haven't talked about this yet. Is that the same office you were in at FERC?
Becky Robinson:Yes. Yes. It's a Yeah. All three of you.
Paul Dockery:A great
Becky Robinson:place to be. Yes.
Paul Dockery:I'm at this stage of my career, I suspect all of us are probably in the similar stage where you start to get questions about recommendations for people as they're entering the workforce about like what to do. And the other day I was actually like, you know what? All the cool people I know doing electricity market work, we're at FERC at some point. Is that is that recommendation y'all give? Like, you should all just go work at FERC as an intern at some point?
Emma Nicholson:I highly recommend FERC and public service more generally. It's a great place to learn about wholesale electricity markets across across The US. And I I think you obviously had great colleagues, Robin and and and Becky. And I would
Becky Robinson:say too, like, throughout FERC, there were like, it's great to see the cohort of people that you worked with at FERC and where they have gone since then. Right? I mean, there's Yeah. There's FERC alumni all throughout the electricity industry and all kinds of organizations, and it's a great it's a great network of contacts to have. Right?
Becky Robinson:And and people that you have gotten to see go in different directions in their career, which is also just really interesting.
Paul Dockery:Yeah. Good. Well, good endorsement for FERC. And also I said it all of the coolest people I know in electricity markets that that isn't strictly true, but it tends to be like, as I'm following the thread of bios, like, oh, you were at FERC at some point. But that's neither here nor there.
Paul Dockery:We aren't here to talk about FERC today. We're going to talk about an ancillary services for an hour, and we're going to try to do it in an entertaining and infotating way using analogies. I've asked everyone here to bring a couple analogies about ancillary services, and then we're gonna rate them in a score from one to 10 on how good your analogy is to do that. We need some scorecards and to get a good scorecard. You need experts.
Paul Dockery:So before we start with our analogies, Emma and Robin, can you give us like your scorecard? What are ancillary services? And if you're gonna rate an analogy, what do you think are the critical factors to rate it on? I'm gonna start with you, Emma.
Emma Nicholson:Understandability would be a great and comprehensibility would be a great first
Paul Dockery:step. And
Emma Nicholson:it's very hard as we'll get into, there's a lot of complicated concepts. So the level of the depth of the analogy and how many concepts you can pull into the analogy.
Paul Dockery:Okay. Anything else you'd add, Robin?
Robin Hytowitz:Yeah. Those were both on my list. And I think one of the other aspects of ancillary services and especially markets in general is the how it's changing over time. And so capturing some of those aspects where, if we took a snapshot of ancillary services every year for the last five years, they look pretty different. And so if you can capture that dynamicism.
Paul Dockery:Okay. So we got three categories. We got understandability, depth of depth of the concept, and changes over time. Anything else? Anything else we should tag on here?
Emma Nicholson:I would say I'm not sure understandability is a word.
Paul Dockery:Oh, but that's a great, maybe that's
Robin Hytowitz:good But I understand it. Yeah,
Emma Nicholson:it's understandable. Yeah. Comprehensive. Yeah. But other than that
Robin Hytowitz:I mean, we could throw in Justin reasonable just to give a hats off
Emma Nicholson:to her.
Paul Dockery:How many points to good adjust and reasonable, I think maybe is an interesting interesting category. I would add this judge's discretion. Like, I will judge it based on my own knee jerk reaction if I think it's good or not. We all get to score all the analogies, and we didn't talk about who goes first. Becky, as a cohost, do you wanna go first or last?
Becky Robinson:Well, I'm already a little worried about how my analogies are gonna stand up to these scoring criteria. So I can kick us off if you want, but either way.
Paul Dockery:Okay. Kick it off. Kick it off.
Becky Robinson:Alright. So I I come with a couple of very simple analogies. And the first one is taking an umbrella with you when you leave the house, even when it's not raining. And the point, I think here, is that you wanna be prepared for something that may not happen. It doesn't come without costs.
Becky Robinson:Right? Because you have to, you know, have and maintain a working umbrella, which they're not a lifetime purchase, I've learned. And you have to physically carry it. Right? Are you walking?
Becky Robinson:Are you getting on the train? It's it's, you know, it's in your hand. But in the event of rain, you'll be covered. And similarly, you know, reserves cover system needs in case something unexpected happens.
Paul Dockery:Okay. We're just doing one at a time. You can't get all of them out of way at first. So, yeah, we're gonna do one at a time. Okay.
Paul Dockery:We're gonna So commentary on that analogy. I like that you have this event driven thing. When I looked at When I was prepping for this, it seems like some ancillary services are event driven, some are not. Robin, Emma, can you help tease out? This is an event driven analogy.
Robin Hytowitz:There there are reserves that are event driven and there are a handful that are not. And that's one of the ways that at EPRI, we have a slide that if you've ever seen an EPRI presentation on markets, I guarantee you've seen this slide before, where we classify it in terms of what's in a response to an event and then a nonevent. So responses to an event are things like contingency reserve. We can think of spinning and non spinning. Something happens, you need to be ready.
Robin Hytowitz:Sometimes you need inertia. That would be an event driven. Whereas non event driven are usually in response to try and help with ACE. And so things like, regulation would be in that category.
Paul Dockery:So is it called contingent reserves because it's contingent on an event?
Emma Nicholson:You carry operating reserves to to manage and and have insurance, an umbrella, if you will, Becky, for your system contingencies and an N minus one contingency is the system's greatest, their greatest generator, typically the greatest risk in terms of megawatts to your system. And you have to cover an area minus one contingency, and there's other types of n minus one minus one. Those are North American Electric Reliability Corporation or NERC standards that that power system operates have to follow. And because they have, you have operating reserves, you carry operating reserves and ancillary services to manage contingencies, events that could occur, and ensure you can reliably serve electricity in the event of, in such cases those events occur.
Paul Dockery:Okay. Well, is great history. Emma, any other thing, commentary on Becky's analogy, and where would you score it?
Emma Nicholson:I think it's I like it very much for the it's very understandable. And in terms of layering on various concepts, which is very hard, and none of mine are multi layered, it would be so it's a you is like my analogies, it has it's not multi concept, but so it's a lower on the complexity and concepts covered, but very high on understandability and just I think it's just unreasonable as well.
Becky Robinson:Umbrellas hereby determined to be just unreasonable.
Paul Dockery:That that's one to 10. Where do you wanna give it?
Emma Nicholson:I I think it's it's an eight. Like an overall
Paul Dockery:It's an eight.
Emma Nicholson:Wow. Wow. Wow.
Paul Dockery:Wow. Judge's discretion. You just really like Becky, so you're giving it a high score. Okay. Round of words.
Paul Dockery:Some of analogies
Becky Robinson:are gonna be better than this one, though. So I
Paul Dockery:you know? Yeah, we're already giving
Becky Robinson:it raise.
Paul Dockery:It's where the judges' heads are at. Okay. Rob Robyn, where are
Emma Nicholson:you at?
Robin Hytowitz:You know, I I hadn't thought about judging other people this much. But I think I'll go with the seven because I feel like the the depth, the layers could be added. Right? Maybe you need one of those umbrellas that has multiple layers to kinda get the different services, or you need the hat that kinda covers your head to take with you. You know, there's different kind of things.
Robin Hytowitz:But, I feel like I guess I'm just helping the analogy. So maybe it is an eight. I take it back.
Paul Dockery:Okay. We can help each other. That's good. Becky, this is nothing personal. It's a four.
Paul Dockery:Honestly, we all know it's a four.
Becky Robinson:I feel like a four is getting a turnout.
Paul Dockery:Yeah. That's fine.
Emma Nicholson:This is
Becky Robinson:why I volunteered to go first, you know?
Paul Dockery:Yeah. Yeah. Yeah.
Becky Robinson:Okay. Because the judges were gonna be easy on me. No. Just because it's, you know, it's a simple concept. It's fine.
Becky Robinson:And we'll we'll get to the more elaborate ones as we as we get to you all. Both of mine are pretty simple concepts.
Paul Dockery:Okay. Robin, what's your analogy? What what do you what are you bringing?
Robin Hytowitz:I'm debating if I should go with the, I'll say, the fun one or the less fun one first. Let's go with fun one.
Paul Dockery:Because we Yeah. Yeah. We may not get we may have to cut this out. We're this is too much fun. We're having we're taking too long.
Paul Dockery:So go with the fun one.
Robin Hytowitz:Well, the fun one would be snacks. So let's start off with snacks at meetings is kind of the general topic. So do you need snacks at meetings? No. But will it give the meeting host confidence that things will run smoother, everyone will be happier?
Robin Hytowitz:Probably, yes. So that's my analogy where system operators, they need to know if something's gonna go wrong. They need to have a backup. You know, is someone gonna come in and be argumentative and really get everyone ramped up and angry? Well, give them a snack.
Robin Hytowitz:Give them a treat. Everyone starts to calm down, then you can get back to the discussion. So that's kinda my high level. But then you get into the maybe a little bit more of the detail. So you can have a wide variety of snacks.
Robin Hytowitz:Right? Some people like salty. Some people like sweet snacks. There's crunchy. There's chewy.
Robin Hytowitz:And historically, you know, I feel like you could kind of guarantee a couple snacks would work for most people. So, you know, who doesn't love potato chips? But now today, right, things are a little different. So there's a lot of different diets. We have more awareness of allergies.
Robin Hytowitz:You need a wider variety to keep folks happy. And so here's my ancillary services changing over time. Maybe I gave myself a metric that I thought I could meet. So, right, AS or ancillary services, right, in the past, we'd have certain needs. But today, now with renewables, now with new resources, different grid assets, the demand side's coming in, we need different kinds of snacks.
Robin Hytowitz:We need different kinds of reserve, such as, for instance, the imbalanced reserve product, in Kaiso. And so, of course, then the question is, how do you decide what to get? How do you decide what new services is needed? Another great question. And my last kind of point to bring it all together is who decides how many snacks to get?
Robin Hytowitz:Right? So it's up to the person who's running the meeting to decide how many snacks to get. They might look at the attendance who accepted the invite, who didn't, and make their best guess. But of course, then things happen. Right?
Robin Hytowitz:You have a whole team that showed up you weren't expecting, then you need to break out the backup backup snacks. So, right, similar to ancillary services, you have event driven, you have your standard operating procedure. In some cases, right, you might be, determining the amount of snacks you need. Say, for the whole year, you know, you have a 20 person meeting. You're just gonna order 20 snacks.
Robin Hytowitz:But then you think, actually, people are sick. Things change. So then you start to move to maybe dynamic ordering. So you order per meeting. So that's a little bit of the shift going on the industry from setting, fixed reserves to dynamic reserves.
Robin Hytowitz:And then lastly, you can kinda think of the subscribe and save model, and then going ordering on a meeting by meeting basis. So that's my snacks analogy. I'll leave it there.
Paul Dockery:Hi. Emma, how are you scoring this one?
Emma Nicholson:That was incredible. I love thank you. I mean, it kept building and building. And you really I think that was an excellent capture, to capture all the layers of complexity because it's does, it is the concept of snacks to make everyone happy, but both the different types of snacks to meet your needs, as well as the, it's really important how much you buy. Who decides how many stocks you buy and how much you buy.
Emma Nicholson:I think that was
Robin Hytowitz:I didn't talk about who pays. That's No. That that's I'll leave that for my favorite economist, Emma. I
Emma Nicholson:think that was an excellent analogy. But so going more on the deep layers and covering more concepts, I would say a nine for me.
Paul Dockery:Is it just and reasonable, Emma?
Emma Nicholson:Absolutely, absolutely.
Paul Dockery:Okay. Becky, Becky, she gave you a seven. Why are you sure it hurts?
Becky Robinson:Well, see, I think this analogy was much better than mine. I liked how, yes, it built on itself, but I like how, you know, it didn't meet these other criteria that admittedly y'all had a hand in establishing. But the I like thinking about how, you know, twenty years ago, the snacks might have been more obvious. And and now the snack needs are just different and more diverse. Right?
Becky Robinson:And and that feels like there's a a clear line of logic there paralleling reserves on the grid. Right? And what are the what does the grid need in terms of reserves? Right? And and we used to have used to have maybe more straightforward, you know, spin and non spin regulation, which we still have all those things.
Becky Robinson:But now we've got other things too, right, because other needs have emerged. So I really like how the snack analogy felt authentic in that way, right, of just, you know, healthy snacks, maybe snacks representative of different dietary restrictions, you know, or catering to different restrictions, that sort of thing. So and and how many to get? You know, I think that's a good that's a good question too. It's an age old question in a way, but but I think with the diversity, maybe that complicates it a little bit.
Becky Robinson:Right? Like, how many how many dairy free people are attending your meetings? Right? How many nut free people are attending your meetings? Anyway, so I I I think it's gotta be better than an eight or whatever y'all score.
Becky Robinson:It's better than mine. So I'll give it a nine.
Paul Dockery:K. Giving it a nine. So Robin, you really were almost losing me when you were doing imbalanced reserves or the gluten free snacks of the electric system. You're like, you were kinda losing me, but then you really came back strong with the who bought like, how much are you gonna buy? Because I think that is really that's to me the best part of this analogy is you're going to a meeting, how do you know how much to buy and how much do you have in reserve?
Paul Dockery:So I see you really brought me back. I guess I'm I'm the hardest scorer of all of this. I'm giving you a seven, but that's a really good score. It's like that's a that's a that's a good seven right there. I really liked it.
Paul Dockery:Okay. I appreciate Yeah, that. Thank absolutely. Emma, you're in the hot seat next. What's your first analogy?
Emma Nicholson:My analogy is not as fabulous as Robin's, but I will hopefully, everyone can hear different approaches to understand the concept of ancillary services. Mine would be a basketball team, or you can actually think of any sports team where you have people on the court that are playing, and in case one of them sprains her ankle or falls down or gets fouled, you have to replace them very quickly, which means on the bench or in this court court side, you need to have players ready to go that are practice and ready to jump in and keep the game going and make sure your team wins. Can't, and so that's sort of the general concept, similar to Robin's and Becky's. It's insurance to keep the grid happy, keep the team owner and crowd happy. And you also need to really carefully select your people that you have on the bench, your ancillary services or your players that are on the bench, because they can't all be of one skill.
Emma Nicholson:If you might have to have people with different offense and defense and people can do good free throws. So you really have to consider that aspect, which would capture how many different types of ancillary services that a grid operator has to carry. They can't all be, they have to have different operating characteristics to meet different needs. And also they are a consideration in your whole team budget. You can't have, you know, you have starters and people in reserve, but you have to pay all of them and you have a budget constraint that you have such a so many big budget.
Emma Nicholson:Rather, you have a budget and you have to allocate it between your your reserve players who are gonna be riding the bench a lot and your your all star players. And and then I think that would attempt to capture the the fact that this is also an economic problem that you're trying to also you're trying to reliably serve the grid, but also do so economically within a budget constraint.
Paul Dockery:I'll go first on this one. I I you undersold it. I mean, I love snacks, but I love a basketball analogy more. And I think there's like this interactive effect of the different, like people on your bench versus your starters and the salary cap because there is a when you're in the game, you are worth more. The starters are have these there are very valuable assets on the grid.
Paul Dockery:You want to use them and deploy them as much as you can. I mean, you have these other useful players that are still NBA players that are worth a lot, but you're kind of paying them to be a sixth man. Six man award is very much a thing in the NBA. And so like the ancillary services are the sixth man of the grid is I think like headline. I think that's headline.
Paul Dockery:You're getting a nine from me on this one. And yeah, I really like it. Where are you at Becky?
Becky Robinson:Well, I also think it I was gonna go nine as well because I feel like it's it's different than Robin's. For one thing, it feels like yours is also event driven. Right? Or maybe. Right?
Becky Robinson:I mean, you need to take a player out. Maybe they fell and, like, hurt their ankle. That's that's event driven. Maybe you just need to give people a break every now and then, and and I don't know if we would consider that event driven in the same way. But, but snacks are less event driven.
Becky Robinson:Right? I mean, snacks can just be you know, for better or worse, someone's bored in the meeting and or, you know, like diversion or just, you know, need for sugar. But so I I think it's good. I I agree. I like, Paul, that you pointed out that a six man six man award is a thing.
Becky Robinson:I was unaware of that, but now I've learned something today. And we haven't even really gotten into ancillary services yet, so I'm pumped.
Paul Dockery:Yeah. Well, it's good.
Emma Nicholson:I mean,
Paul Dockery:we're into ancillary services. Analogies are they're part of it. It's part of understanding. Yes. Robin, where are you at on this analogy?
Robin Hytowitz:I'll just note that when I was an OP with these fine ladies, I did win our, that our March Madness, bracket, without knowing anything about the teams that year. So I should have brought my basketball mug that was my my FERC award. So I I was very proud of that. I I lost this year at my bracket. So I will I'll take away a little bit of that.
Robin Hytowitz:I really liked this analogy as well. I think there were a lot of I I really liked the budgetary constraint thinking about it. I also I thought was thinking through that, right, a player can actually hypothetically play different roles if they had to. They're really aimed at one, but, you know, a lot of them can play another kind of like certain different, generators. Right?
Robin Hytowitz:Maybe they're really going after regulation, but they could do spinning if they needed to. So I I liked that there was a lot of ways that you could go with that. And I know maybe that's getting into the boring part, Paul. But I, I would say I would give this one a nine, as well.
Paul Dockery:Okay. So I mean, so far, this is the highest scoring analogy. You feel good about that, Emma? You feel good.
Emma Nicholson:Thank you. Thank you. I think they're all great, but I appreciate it.
Paul Dockery:Okay. I, I've got, I'll take mine next. So my analogy for this are repair services for a car and then the warranties or insurance for those repair services. So when you get a car, you can get AAA and that is an insurance policy for if you break down in that car and you can exercise that in an event, if something goes wrong and you're on the side of the road, you can go call in AAA and they pull you away. There's also other types of insurance for repair services.
Paul Dockery:So just comprehensive auto insurance is another form of this where it's not, also event driven. It also provides some different type of repair that you need to acquire. And that's different from just AAA. You need to actually maybe get bodywork done. There's also when you buy a car, can get like oil changes for life from the dealership.
Paul Dockery:And that is a type of insurance or warranty that isn't necessarily event driven, it's just the recurring service. You're gonna go back, but you're protected from that. You've kind of already acquired it with the car. And one of the things, as you get, like, let's say I recently bought an electric vehicle and when you go in and they're selling you these drivetrain warranties and you're like, well, what does a drivetrain warranty cover? It's a warranty for if your engine breaks down and you ask like, what does that apply to?
Paul Dockery:And they told me literally anything oil touches in your car and for an electric vehicle, that's not very useful because the battery doesn't have oil in it. The electric motors don't have oil in it. Not really useful at all. So that changes the type of insurance you need over time and how you define the insurance product, how you define the real reliability service you need is technology dependent. That's my analogy.
Paul Dockery:Insurance and repair services for cars.
Robin Hytowitz:I feel like I know a little bit more about insurance and car repair than I did before you started talking. So well, thank you. But I I liked I liked the that you touched on the event and non event driven reserves through the analogy. So I think that that part, I really enjoyed. I feel like that there was technical depth both on the car side and a little bit getting into the different kinds of services and how they change over time.
Robin Hytowitz:So I think in terms of those metrics, you kind of hit some of those. So I am gonna give you an eight.
Paul Dockery:K. I accept an eight. Emma, where are you at? What do you think?
Emma Nicholson:I think that was also a great analogy. You have it was comprehensible and also layered, like the different types of risks you face as an auto owner, and you have to insure against all of those risks. And I think insurance as a concept is a really great way to think about ancillary services. It was slightly less, I guess because of the umbrella snack and basketball team analogies are very more dynamic. This is because ancillary services all are happening simultaneously and you have to be ready, I guess, anything.
Emma Nicholson:And given the types of slightly one miss would be the the fact that lack the dynamism of of an ancillary service operator that they have to the services they have to buy. But I think it was very good, and I would I would give you an eight as well, and and Justin Reasonable as well.
Paul Dockery:Okay. Justin that's where I was going for it. Is it Justin reasonable? I like it. Becky?
Becky Robinson:So what I what I started to think I might not like about your analogy, think actually works for the analogy. So what I what I sort of felt like it's like, ugh, you know, I'm just imagining you're going to get the car, right? And you're all excited about getting a car, but then you have to have all these conversations about like, okay, now I need this kind of insurance for the car. What kind of warranty do I need for it? Like, do I need this kind of warranty?
Becky Robinson:Do I not need this kind of warranty? Like, lots more decisions and lots more costs. And you're kind of like, why do I need all these things? Like, why do I need all these separate things? Why do I have to get this from AAA separate than the warranty from the dealer than the yada yada yada.
Becky Robinson:But I feel like in a way that is we have lots of different kinds of reserves on the grid and ancillary services. And sometimes it can be hard to disentangle, like, why don't you just buy more of this first kind that you talked about rather than creating a second and third and fourth product definition. Right? So I think I think that works for the analogy, even though it's it kind of put me in a negative headspace. But so I think I think it scores well.
Becky Robinson:I I don't know. We might have started I might have started out too high, but I'm gonna give it a nine.
Paul Dockery:Wow. Was honored to receive your nine. I accept it as an honor that it is. So we've got some great analogies here. The top one so far is an NBA team.
Paul Dockery:I don't have any analogies that will top that one, but Robin, I kinda I'm counting on you. Can you beat it? Do you have another analogy?
Robin Hytowitz:I have another one. I don't think it'll beat it though. So I will give full credit. I did quickly ask the folks at EPRI who do markets, and I I mentioned that we were doing analogies. And someone else on my team who I will give full credit to came up with this one.
Robin Hytowitz:And so one of the things that is had been top of her mind, and, you know, I'm living California, so I think it's top of a lot of Californians minds as well, is water. And so right when when you're in a region where water is abundant, you have lots of rainfall and reserve, people don't really think too much about it. And so there's not really a need to regulate usage or to compensate people. It's just free and available. But the second that a drought hits, here's your event, everything becomes scarce.
Robin Hytowitz:Right? Then you start planning a lot more carefully. You might ration. You might have different infrastructure projects. You might need different kind of water rights, conserving, reallocating.
Robin Hytowitz:So there's a lot of other things that happen. And so, right, when you think about new products coming in, say, you need something like inertia on the system, maybe before it was free, and now it's not gonna be free. You need to think about lot more about it. There she had a couple great ones, like, maybe Gatorade instead of water, or maybe we need the recycled water suits in Dune that we all step up and innovate there. So I was especially excited about the Dune reference.
Robin Hytowitz:So I it it went from intensity of water to, futuristic spacesuits. So
Paul Dockery:High level water analogy. Ugh. So good. Emma, what what's your score on this one? What do you think?
Emma Nicholson:I think that was excellent, Robin. It really captured for me me the scarcity aspect, because that in essence, of course, is why we don't have infinite amounts of electricity, and it's certainly becoming more and more so every day and projected to continue. And the fact that when you're in a drought and you have to start rationing the scarce resource, that really captured an aspect, a very important aspect of ancillary services. So I think that was a great analogy. And I would give it does lack the other really important aspect of ancillary services as an insurance.
Emma Nicholson:So I think I would give it a 7.5, but I really think it's a 10 on capturing the a 9.5 because I'm obviously slightly grade inflation here, I guess. But a 9.5 on the ass capturing the really important aspect of near scarce now, you have to have a different protocol. You're rationing. You have to be much more careful and operate in a different way when you're in a shortage or near shortage condition. So I think that that's a very hard concept to convey.
Emma Nicholson:So very, very innovative.
Robin Hytowitz:Yeah. And I'll sorry. I didn't mention Nikita Singhal is the my colleague's name, and so I'll give and you know Nikita, MSO. I'll give her, credit. Yeah.
Paul Dockery:Yeah. With a shout out. I mean, just scoring bonus
Robin Hytowitz:points. With a
Paul Dockery:shout out. Doon reference and shout outs. Just scoring bonus points in my book all the way down. Is it just and reasonable, Emma? Is it just and reasonable?
Emma Nicholson:Absolutely. Absolutely.
Paul Dockery:Just and reasonable. Becky, where do you score it?
Becky Robinson:Well, I I like it as an analogy. It feels, it feels intuitive. And I think, like you said, Robin, water is very much water is a huge thing in California in the West. Right? Like, we we are living through a spring where, you know, the snow melted early.
Becky Robinson:Right? There's there's, you know, maybe if I'm getting it right, there's maybe water in the reservoirs, but not snowpack. And so that changes the landscape for like, what is what is the market in the West gonna look like this year? Right? What is the supply availability?
Becky Robinson:What are the patterns of that? How is that going to impact things? And so I really like it from that angle and kind of bringing home just like how critical it is. And you either have it, and sometimes you have way too much of it. But then if you don't have it, that's a big problem.
Becky Robinson:And I think you were saying it's it's sort of like an analogy for headroom on the system. Right? Because that's that's what a lot of the reserves are getting at is is do I have headroom to ramp up? Maybe floor room, if we think about it that way, to ramp down as needed. Even though we we have these product definitions that are much more finely tuned than that sort of general concept.
Becky Robinson:So I think it's yeah. I I I'm gonna give it maybe a I would score these things differently if we had them all side by side at the get go. But I'm gonna give it maybe a six. I think, like, conceptually,
Emma Nicholson:it's Six. Gonna be
Becky Robinson:I the six is a good grade. It could be I I think.
Emma Nicholson:Fine. I'll give it a seven.
Becky Robinson:You gave something a seven, Paul. But I think
Paul Dockery:you gave me a four, Paul. I don't.
Emma Nicholson:I know.
Paul Dockery:Yeah. No. It's
Becky Robinson:No. Which is fine. But I think conceptually, it's good. But in terms of the depth of illustrating the concept, I think it's it's it's really good at illustrating the high level concept, but, like, not so much the gradations of things. But, I mean, overall positive.
Becky Robinson:But I think it just, you know, the snacks at meetings.
Paul Dockery:Ugh. I'd say I'd I'm giving it a 10. Nikki, you did a great job. Don't take Becky's criticism personally. Ten ten.
Paul Dockery:We got a Dune reference in here. Gosh. Just great. Absolutely love a water analogy. Anybody else have another one?
Paul Dockery:I don't have anything else, but Becky, Emma, do you have a Do you wanna put in your second ones?
Emma Nicholson:I didn't have a great I don't have a great second or one worth sharing.
Paul Dockery:Maybe So I
Emma Nicholson:Becky might have one.
Paul Dockery:Do you wanna cover come back from before, Becky? You wanna try again?
Becky Robinson:I don't know if my next one's gonna be any better. But I'll I'll give it to you and you can decide. Okay, please. So my Appreciate second analogy is a spare tire in your car. And, you know, it's it's also event driven, but but I think of it as an analogy for non spin reserve.
Becky Robinson:Right? Because it may take a few minutes. But if you get a flat tire, you can change it and quickly be back somewhat quickly be back in business. And likewise, non spin reserves on the system allow us to have, you know, certain resources in the hopper that we can call on if needed to step in and backfill when you have a contingency or lose a resource or something like that.
Paul Dockery:I love it. That is just unreasonable. It's great.
Robin Hytowitz:Totally. But we can also add, right, maybe it's the air in the tire too. Right? Because you maybe fill up a little air. So that's your regulation.
Robin Hytowitz:So maybe you do that every more frequently. Right? And it just helps balance what you
Becky Robinson:have going
Emma Nicholson:on your tire.
Becky Robinson:Yeah. I like that. Way to improve on my analogy. Thank you, Robin.
Robin Hytowitz:We're we're collaborative here.
Paul Dockery:And I think it's great. It's very related to my analogy. It's a repair service, and the the spare tire is one of those repair services. I think that's great. I'm not gonna score it.
Paul Dockery:Justin Reasonable, Emma, do you gonna do you wanna score it?
Emma Nicholson:I think it it was great, and I would give it a 7.5.
Becky Robinson:You are very good.
Paul Dockery:Great score.
Becky Robinson:Yeah. With Robins and
Paul Dockery:Bellashy. Perfect.
Becky Robinson:But, yes, it is it is, it is a similar thing as Paul's. Although lots of new cars don't come with spare tires anymore. You
Emma Nicholson:know? It's kind
Paul Dockery:of Yeah.
Becky Robinson:Being phased out.
Paul Dockery:I'm not I don't don't take this as me taking over your analogy. I was just, endorsing it because I think we're thinking of similar things. Okay. We're going to pivot. We've gotten analogies.
Paul Dockery:I think there's a general like landscape of the things you have to think about what's important, but we want to dive deeper into like, are ancillary services? We've talked about the event driven non event driven Robin, EPRI has done a lot of interesting research on ancillary services and has somewhat of a like schema for categorizing them. You just wanna kind of walk through what ancillary services are. Do you mind trying to do like thirty seconds of like explanation? Not that thirty second is any way reasonable for this type of work.
Robin Hytowitz:Well, there there's the thirty second version and then there's the two hour version. So I'll I'll start with the first and see where we get. So yeah. So ancillary services, sometimes we refer to them more generally as essential reliability services as more of a general term for covering these. And so the way and I I think maybe you mentioned posting this somewhere.
Robin Hytowitz:So I'll describe a little bit the the image that we have. And, if if it's not posted there, then feel free to reach out to me, and I'm happy to send it. So in addition to that operating reserve category that we started with, where you have contingency reserve that covers things like inertia and fast frequency response, spinning, non spinning, that we sometimes call secondary and tertiary reserve. We also have the nonevent, which is the regulating reserve, and that really deals with correcting ACE, where we also have things like, flexibility and following reserve, that helps correct anticipated ACE. But there's a whole other category of reserves where we'd have planning reserves.
Robin Hytowitz:So you can think of flexible capacity or ICAP, And then we have the whole volts and reactive control or reserve, and where it's static and dynamic. And then also things like black start restoration and sorts short circuit contribution. So there's really a wide variety of different kinds of ancillary services that deal with different needs. And then the long and short of the next part, which, I think, you know, Emma probably might wanna talk more about the economic side of things, is that not all of them are auction based. So there are some of those services which are auction based, meaning there's a product.
Robin Hytowitz:So the, you know, spinning, non spinnings, you know, there's different ways that the ISOs across the country call them. And regulation reserve are something that everyone has in as an auction. But there are some that just get cost recovery, and there are others where some markets have them as an auction where it's emerging and some and some don't. Right? So fast frequency response is a good example of a a service where there are products, right in ERCOT but not other places.
Robin Hytowitz:So there's my my short version.
Paul Dockery:And I did ask for the short version and it was great. 10 out of 10 on the short version. Appreciate it. I do feel like I need a little bit more explanation on a couple things and maybe y'all can can help enlighten me. Because you talked about contingency reserves and it's like secondary and tertiary.
Paul Dockery:What are we doing here and what's that mean? And then ACE, somebody needs to give me their their like one thought or one one sentence explanation of what ACE is. When I look at Epri's graphics, it does seem like ACE is a great vector to kind of understand what we're doing on all of these reserves. Like, it comes up a lot.
Robin Hytowitz:Yeah. It does come up a lot. And I feel like this is another one where I wish I had an analogy. I I bet you there are some good analogies out there. I don't know if either of you have analogies for area control error, also known as ACE.
Robin Hytowitz:Let me define, acronyms there for you. And so may maybe a way to think of it is if you had, two buckets of water that are connected by a hose, like over time, they'd balance out when they each get higher. And so you kinda need to keep that balance and back and forth and back and forth, and maybe something about them being on a teeter taller table, so they're always in balance. And so that's what you're trying to do in a system where each different balancing area. So in the West, right, or maybe the East Coast, there's many different balancing areas that have to balance between them to to maintain frequency across.
Robin Hytowitz:So Emma, did you have another analogy? A better one?
Emma Nicholson:I love that you're such an engineer because your analogy of like the hose the bucket from the hose are like, what? But it scales. But yes, I think of it as a very a non electrical engineering doctorate. There's a VA, Robin has in engineering, as maintaining the the balance between supply and demand on a power system within a very tight tolerance area area control area area. Right?
Emma Nicholson:And and you have to if any if they ever get too diff if they diverge by too much, then you have very you can have bad bad implications at either direction, and you have to that's sort of like the bogey, the target that they're trying to keep in balance, in a constant continuous balance. And I hope I didn't like say anything injurious to electrical engineering, Robin. Please let me fight it.
Paul Dockery:So with that, like, okay, so it's about within these like jurisdictional boundaries, because a balancing authority has nothing to do with the actual connectivity of the grid, but you have a jurisdiction and with to make sure everybody's taking their fair share, you need to keep it within a tight bounds of making sure imports and exports and power system is balanced every interval. So that's ACE as I think I understand it. But then how are the reserves defined in terms of that? Because when I look at this, the secondary tertiary, is that different ways to respond to it? Or what is the secondary tertiary?
Paul Dockery:Is it completely different?
Robin Hytowitz:Great question. So on the so on our graph, we have contingency reserve, and that we divide into different categories. So I'll I'll kinda read off the five. So inertia, fast frequency response, primary, secondary, and tertiary. And now a lot of those terms aren't then used in product definitions, and so maybe that's, another way to kind of separate these.
Robin Hytowitz:So secondary, you can think of a spinning and tertiary being non spinning. And so those are responding to an event. Right? So you have some kind of event, and if you've ever seen a graph of frequency, you might have a frequency drop. So you need to bring the frequency back up.
Robin Hytowitz:And so all of those different types of reserves are helping you maintain get the system back into balance after an event.
Emma Nicholson:My thought is, what really matters is that the electrical engineers design make sure we have all the products, tell us what we need in what amounts, and give us the rules as to how to keep the grid happy, supply balanced supply and demand. And economics is layered on top of that often to try to do that in an efficient way with transparent prices and price discovery. So the economics are not necessary, strictly necessary. I love them, and I think a lot of folks in The US have a whole organized wholesale electricity markets, but there are other parts of The US that do all of these things and they manage ACE and have operating reserves, but they don't price them separately. They don't have LMPs.
Emma Nicholson:So there's the the underlying core is heads of electrical engineers, power system engineers, make sure that the systems run and there's no you don't have to make any NERC events. You have your ACE in in in within operating talents tolerances. If you are lucky enough to be in an op in a organized electricity market, you can layer on economics and let let folks know what the prices are and and resources compete to serve that those needs, energy and ancillary, at least cost.
Becky Robinson:So there's if I can follow-up on those things. So so Robin, like you mentioned, several different types of response that and the top one was and I think they go and kind of correct me, but order of maybe speed of kicking in, if you will. So, like, the first one was inertia, and then and then maybe primary frequency response and and then, you know, so on down the list. But for instance, like, so to tie in the economics, Emma, like, we don't typically pay for inertia provided to the grid. Right?
Becky Robinson:Because inertia is provided by spinning mass, but you don't really have to do anything different to provide it. Like, is like, what how would you get into or how would you articulate? Like, why do we pay for some of these things and not pay for other of these things?
Emma Nicholson:That's a great question. I'll take a first stab and then certainly, Robin, please jump in. But it's a really great aspect of Ancillary's that you picked up on, Becky, is response time. So the, in the markets, you regulation is what will basically keep keep your, system in balance instantaneously. And if an an event occurs, you you would, deploy within ten or thirty minutes, ten or thirty minute operating reserves.
Emma Nicholson:And there are other ancillary reserve products or even longer term. That might be a two hour longer uncertainty product. So response time is a very important aspect of ancillary services. And to get back to your question about why don't we pay for inertia? Essentially, it's like too cheap to meter.
Emma Nicholson:It is an abundant supply in both the Eastern and Western interconnect. There's enough of it. There's paying for it. The price would be zero, essentially. It's like joint and common, as economists often say, is with the provision of electricity.
Emma Nicholson:What does get costly to provide and you have to make explicit provisions for is to have operating reserves, both, you know, spinning and supplemental or offline. You have to make sure you have arranged for that and compensate people for for providing those services. But certain services that are very abundant and it's like in surplus, they they they would be they they're not even worth at this point pricing. But that could change. I think the closest and nobody really pays for inertia, I think the closest system in theory to, in The US rather, to, pay for inertia might be ERCOT because they are a smaller system.
Emma Nicholson:Right? As we all know, they're they they have they're a smaller system and they have they're having greater and greater penetrations of inverter based resources that don't have rotating mass. They would have maybe have to look at synthetic inertia, but I'm getting out of my skis and not I'm not an engineer. But I think Robin can correct me. But ultimately, it is truly a matter of the abundance or scarcity of a resource as to how much do you need to pay resources to be on standby, on the bench or an umbrella or an insurance service to jump in quickly to provide it if if needed.
Robin Hytowitz:In the future, if we had different types of assets on our system, then the question is, would you need it? And so one of the things, though, on the engineering side that folks are doing is saying, well, inverter based resources, they don't have that rotating mass. So can they do we are there was a very big worry. Are we going to need inertia? But because of the the, different devices that you can put on your system, a lot of those resources can, provide synthetic inertia.
Robin Hytowitz:And so there's ways to to handle it without necessarily needing to price it as a product. But there are other services. So I mentioned Volt and VaR support. So some of those are just too complex to design. So why don't we have a product for it?
Robin Hytowitz:It's just too hard to do. And some of it is very local, and so you might not actually have a product that could be, you know, ISO wide. And so the the location of it is just, wouldn't have any competition. Right? Because they're in this little boat pocket.
Robin Hytowitz:And sometimes the kind of similar to inertia, there are other services. I think like Black Start might be an example where the cost of the service is so small, the cost of administering a product outweighs the benefits. So that's kind of another way to say, right, if prices are always zero, then just administering a product is going to cost more than the benefits that you'll receive. So
Paul Dockery:Well, that's a great transition to where I wanted to take us next, which is like the arc of ancillary services. So Robin, you mentioned right now, inertia is too cheap to meter and Emmy you said the same thing, but that may not always be the case. I remember the story from a year or two ago where Australia was considering investment in synchronous condensers, which are just these big spinning flywheels that support inertia, and it's cheap enough to install this huge device, but then just power it with solar electricity and it provides inertia. And that's something you would expect like if you're gonna invest that much money in something like that, maybe it's worth paying for that service. So where are we in the arc of ancillary services?
Paul Dockery:What's new and interesting in The US and who's doing what interesting things?
Emma Nicholson:It's very interesting arc, and it all starts, at least for FERC minded folks, with order eight eighty eight by FERC, which established if you're going to be a public transmission, public utility transmission provider, you have to provide certain, what we call classic ancillary services to to your your system and including IPPs and loads. The and and those I think the classic ancillary services would be regulation, which would keep on an instantaneous basis, the voltage with inappropriate tolerance. Operating reserves and spinning, let's say operating reserves or spinning, and then supplemental reserves or say 30. And not to, sorry to confuse everyone, but essentially, yeah. Regulation, ten minute reserves and thirty minute reserves are the classic eight eighty eight ancillary services.
Emma Nicholson:And they're primarily targeted at meeting NERC requirements that to make to recover quickly from a contingency event. That's what the ten minute reserves are for. And then the thirty minute reserves are to replenish your reserves so you can be in in good stead and have operating reserves and your energy. And over time, as the power, the generation mix changed and the arc of the ancillary services is when more weather dependent wind and solar resources came on the grid, which we're all aware of, the, as along with state state energy policy, a lot of more new different resource types came on, and they had a different operating profile, operating characteristic where they were weather dependent, and there was a lot more uncertainty as to how what their output would be within the next operating day. And that is a new need that that was that emerged with these weather dependent resources, and that required operators to get creative and say, I need another type of insurance product to insure me against this uncertain wind or solar or both output.
Emma Nicholson:So, we say that's not a contingency, like, I'm not gonna lose my largest generator and just replace it with ten minute reserves. This is actually have a very there's uncertainty as to within what the next hour, how much solar output am I gonna have? How do I ensure against that? And that way operators address that and start it was actually MISO and KISO, or the first two. They create a Ramp product.
Emma Nicholson:And what Ramp does is it manages what we call in the business net load uncertainty, which is load minus the output of non dispatchable generation or load minus wind and solar. So sort of the new bogey that a lot of high renewable penetration systems have to follow is the what what net load is gonna look like and how do we ensure against this net load, which is a lot more uncertain than it than gross load was in the past. And they created CISO and MISO were first a ramp product. And then SPP came on and created also a ramping product. And these are short term products, and you would hold, essentially, the capability to ramp up or down within ten or fifteen minutes, depending on the market, to manage net load uncertainty, to manage the and that would that that Ramp product helped better integrate increasing amounts of of weather dependent resources.
Emma Nicholson:That's and that's the arc. And and as more and more of the So first we had Ramp products, and then as more and more of these ancillary services Sorry, excuse me. As more and more wind and solar came on the system, and as we know, a lot of these systems, you can have significant amounts, more than half of your energy in a single instantaneously can be provided by wind or solar. You had uncertainty over longer than a ten minute or fifteen minute time horizon, which the current flexible ramp product, Kaiso ramp, and so on. What are we gonna do to manage that longer term uncertainty so I can feel comfortable that I can manage an unknown weather system that's heading my way?
Emma Nicholson:And STP had a had something called an uncertainty product, which is actually a two hour. It's essentially I would call it a ramp product, but it's essentially a two hour product to say within two hours, you you have this reserve that you're holding to manage longer term uncertainty. And that I think that that's the arc is that you're gonna need the more and more renewables you add, you're gonna first need some short term ramp products. And then as it gets higher and higher, you're gonna have to add additional more additional longer term ramp ramp or let's say reserve slash capacity products.
Robin Hytowitz:That kind of leads perfectly into, well, what about the uncertainty between day ahead and real time? How would you handle that? I know. I bet you, Becky, you might have an answer to
Paul Dockery:that question.
Becky Robinson:But I love that connection.
Robin Hytowitz:Yeah. I so imbalanced product that's coming up that is handling that question between, you know, the uncertainty you have in your day ahead time frame moving then to real time. Right? Again, gen if we had mostly fossil generators, you wouldn't have as much uncertainty. You might have the is it going could it go on outage?
Robin Hytowitz:But it's the you know, is the is our weather forecast poor? And so I think that is what's, at least from my perspective, but, of course, I'll let our Kaizo experts speak speak for Kaizo, one of the things that the imbalanced reserve product at Kaizo is is managing.
Becky Robinson:Yes. Yes. So right. Introducing that that notion of an uncertainty product, which as you point out, Emma, is kind of the that's the new kinds of products that we're seeing several different markets adding on top of the traditional ancillary services. So we we have we've had one of those in Kaiso markets in the real time for quite a while.
Becky Robinson:EDAM introducing that uncertainty product in the day ahead market for the first time. Super excited about that. Getting to see how that works. What do we learn from it? How is that helping, you know, position, you know, the the day ahead market awards, in total better to meet, real time needs that may materialize, right, different than your forecast, but where you may have uncertainty, driving, you know, different outcomes than you anticipated.
Becky Robinson:So super, super excited to to hear that, and thanks for the shout out, in terms of that being an up and coming exciting thing.
Emma Nicholson:I missed the extent, yeah, indeed. I like that. We certainly like worked together on that, and that's an excellent example of as the market evolves, as the resources on the system evolve, the risks that the operators they change, and you have to get different insurance products. So it's a very interesting we're excited for for the launch of the of extended day ahead market and the day and the day ahead energy market enhancements.
Paul Dockery:Exactly right. Great transition. Emma, I loved how you framed this. I'm gonna do a callback because you mentioned that really what you're doing is you're asking the engineers, what do you need to reliably operate a grid? And then you're kind of defining, taking the economics and saying, hey, economists, and saying, hey, we need this thing.
Paul Dockery:What's the best way to procure it? And is there can I design something so I can run it through an auction and procure it through an auction? So for things like these new imbalanced products, what are you bidding? Are they biddable? Are they not?
Paul Dockery:How is that treated differently as you're developing the products as an economist thinking about the effective way to procure them?
Emma Nicholson:That's a great question. And the start with the classics, the the order eight eighty eight ancillaries that kind of go on, were designed for a thermal system, so no ramping products but regulation, ten and thirty minute operating reserves, to simplify. Those are often not bid. I'm sorry. Regulation is bid because you act there's you you would be bidding mileage to how much you move and and the capacity of regulation to which you're willing to provide to the operator.
Emma Nicholson:So regulation is a very active ancillary service. It has rigged opportunity cost that is explicitly bid. And and what the other two classic eight eighty eight ancillaries being ten and thirty minute operating reserves to simplify are, you are not in explicitly, but they are implicitly, the operator will make an implicit bid for those reserves. And they essentially, they impute, what is your opportunity costs of providing this ten minute reserve product? You could be providing energy, but I'm gonna instead hold you back and make you sit in reserve and jump in if needed.
Emma Nicholson:So I have to make you financially indifferent between providing energy and this operating reserve. So, what I will do is I'll pay you
Paul Dockery:your
Emma Nicholson:opportunity costs, your foregone profit. And that is through a beautiful marriage of economics and engineering that Robin got her doctorate in. And through power systems optimization, the ISOs jointly optimize and co optimize the purchase and pricing of energy and ancillary services together. So they make they come out with a set of prices and dispatch instructions and operating reserve designations such that the everybody is financially everyone is financially incented to follow their dispatch instruction, which means there's no profitable deviation. They'll follow their instruction.
Emma Nicholson:And the price of the product will reflect the opportunity costs, of providing reserves in that instance. And energy will provide will reflect the opportunity costs of providing energy. So those products, the classic ancillary services are are generally imputed. They're not bid based. The same is true for for shorter term ramp products.
Emma Nicholson:It's they say what is what's your opportunity cost of not producing energy right now, but rather staying back for for for and providing ramp. And and and also it's also if the price is a function of the demand too. And the when you're talking about these longer term products, like a capability uncertainty type product, you actually they're increasingly reviewing that and letting you bid explicitly to provide that. Because oftentimes, you can be an offline unit and providing that product would involve you starting up. And, and so there I think that as these ancillary services become more important and we're gonna need more of them and we're gonna have to have a lot more agile grid, you have to start thinking there's other costs we have to think about wear and tear, startup, potentially some fuel, components.
Emma Nicholson:So they are That's a new trend also in ancillaries is explicit bidding rather than an imputed opportunity cost based bid where the ISO just takes your energy bid, imputes an opportunity cost, and and come up with us.
Becky Robinson:I think you hit on a number of very fundamental concepts there, Emma. So thank you for illustrating. What is incentive compatibility? What is co optimization and opportunity cost? So I think that was that was great.
Becky Robinson:And and for our listeners who may be, you know, ISO market participants, we I think unlike some of the other markets, like Emma said, but we do allow bids for for spin spending reserve in in the ISO. So I think there's different considerations that have kind of weighed into right. What do you what what does that bid represent? Right?
Robin Hytowitz:Person's allow bids, but the question is do should you bid? And I as a former working with a former market participant in California, when I first got there, was like, oh, should I put in a bid? I don't know. So that was a a fun exercise in taking the theory into
Becky Robinson:Yeah. Yeah. What does it cost you? How do and how do you think about that?
Robin Hytowitz:And I think that one of the things that that taught me is that there are sometimes external factors that are playing into how you're optimizing your portfolio as a whole that might not that might not be obvious when it just comes to optimizing like, co optimizing the two in the system. So I think that's sometimes why the bids can be helpful because there are things going on outside that might influence the the way that you want to operate that can't be captured in our handy dandy co optimized constraints.
Paul Dockery:There's two aspects on this I really wanna get into, which is the deliverability of these products. So I think that's one of the areas of discourse about ancillary services is in this beautiful marriage of economics and engineering, do we actually take into account and should we, how much should we, whether you can actually get that service throughout where it's needed, how do you do that? Makes the math more complicated, and it makes the procurement of products probably more complicated. Who wants to talk about deliverability of reserves?
Robin Hytowitz:So that I actually had noted it down because I wanted to make sure we did talk about deliverability because that's something that I think is in that process of changing over time. Because as I mean, one, as markets are getting bigger, it is harder to deliver. Right? If you think of the MISO footprint over time, I mean, that's a really good one that it has grown significantly and how to get from MISO North to MISO South is a, you know, a good question. And so I think many of the ISOs are considering deliverability in terms of where does that look in the future.
Robin Hytowitz:But I will say, I I think one of the kids say the math is mathing something like that. Like, it's really hard to include deliverability constraints into your optimization. Right? We're we're already adding in so many difficult things when it comes to storage and DERs. And now on top of that, you want to include a constraint that is inherently locational, and that just adds layers and layers of of complexity.
Robin Hytowitz:But I would say that this is a conversation I've had over the past couple years. Think MISO held a nice little summit a few years ago. One of our colleagues held it to talk about how are you doing deliverability. So I think that's, it's coming. But yeah.
Robin Hytowitz:Emma, did you wanna dive in as well? Yeah.
Emma Nicholson:Yes. It is an emerging issue and certainly also part of the arc of the ancillary services. We need more ancillary services, and
Paul Dockery:the
Emma Nicholson:resources that we are using to get it changing. And California has dealt with this issue and resolved it with deployment scenarios too. And I think as essentially from a market perspective, the problem with ensuring deliverability is that operating reserves and ramp are not procured nodally, but they're procured either zonally or sometimes a system wide basis. So that means they're procured without consideration of operating constraints. And what happened, I can reference an example in MISO, which occurred when I was at FERC is that essentially 90%, 97% of the time wind dispatchable intermittent resources they're referred to in the MISO.
Emma Nicholson:They would clear to provide their flex ramp or operating reserves, they were transmission constrained. And the model, when it selected and designated this wind resource as a ramp product, because it was not procured on a locational basis, it was procured in a regional, sorry, as a zonal. The market software simply couldn't recognize it's actually transmission constrained. They said, look like, oh, wow, there are zero opportunity costs, they have headroom. Let's clear them for ramp.
Emma Nicholson:Well, the problem is they have headroom because they're constrained. And it was essentially MISO came to FERC and said, it's untenable. Our software can't recognize if this wind unit is going to be at a be constrained, and we basically, there's this relationship that's happening when there's low power prices, and it's because they're all constrained and we're gonna have to curtail the wind. We're clearing resources that are not deliverable, that they are transmission constrained down. And California was very innovative, and you had a similar problem due to hydro, not just wind, not just solar and wind, but I believe it was more hydro driven off.
Emma Nicholson:And and you made deployment scenarios to try to estimate, say, we we can't know for sure what's gonna happen in the next five minute interval who who will be dispatched because we haven't cleared that interval yet. And we're not going to procure ancillary services notably, but what we can do is estimate likely the likelihood that a resource is going to be in a constrained be transmission constrained, and take that into account as an additional constraint when we clear our flexible ramp. And Robin can speak to you because that's her discipline there of how much that adds an extra layer of complexity to the optimization. But it's absolutely necessary because the last thing you want to be doing is procuring ancillary services on a, say, zonal basis and be paying resources and for providing ramp that they're physically incapable of providing. So it's a necessary adjustment, but it does add complexity to the market.
Emma Nicholson:And the CAISO is the only one that I'm aware of that's actually addressed this. I know MISO apparently they intend to, and I know SVP has had some similar issues, but it's it's an issue that anybody in a high penetration system when you have either zero marginal cost resources like wind, solar, or hydro, and you have constraints that bind, that aren't incorporated in your ancillary service procurement, it's it's it's likely to happen.
Robin Hytowitz:You you might say it's kind of like if your friend you're going out with a friend and they say, well, I'll bring the umbrella for both of us, but it starts raining before you meet up.
Paul Dockery:Oh, man. You're using an analogy. Yes.
Emma Nicholson:Or or you have someone on the bench and you expect to throw her in the game, but she actually is, like, tied to her seat and she can't get up. And you have a false sense with security that you're or they're asleep. For some reason,
Robin Hytowitz:they're I was gonna say in the bathroom is another option. Yeah.
Paul Dockery:In the bathroom.
Robin Hytowitz:Kidnapped to a seat, Cherry. I mean, you know.
Emma Nicholson:That's really weird tied to a seat, but
Paul Dockery:The other kind of area I wanted to get to is like how much to procure of these reserves? Because as you're talking about moving to uncertainty products, the bounds of uncertainty are very wide, and you have to start using discretion and it's a policy choice of how much of that uncertainty to cover by procuring reserves or ancillary services.
Robin Hytowitz:I can start again. We can kinda go back and forth. So I've the two words I wrote down was deliverability and, dynamic reserves. So I'm glad that you you touched on both. I I think dynamic You didn't know
Paul Dockery:I was touching on dynamic reserves. I didn't even know that. So, yeah, help me. Why we call this dynamic reserves? Maybe start there.
Robin Hytowitz:One of the things that I think, we've been doing a lot of research at EPRI over many, many years. And, one of my other colleagues, Eric Hila, has been trying to bring up dynamic reserves as often as he can, and he'll probably give you a timeline of ten years ago. He was like, hey, guys. Dynamic reserves. We need it.
Robin Hytowitz:And so essentially, it's recognizing that some of the quantities are chosen far ahead of time, and some of them are on an annual basis. And some of them are adjusted by small amounts over time depending on the product, but they're they're not always responsive to system conditions. And so I think that that's, one of the big things with dynamic reserves is that there are a variety of especially now of inputs of weather that comes into our generation stack that didn't come in before. And so if you pick a number at the beginning of the year and, you know, the weather day by day drastically changes, you know, you have, again, like, things like n minus one being one example, but, you know, regulation being another example. And those numbers don't let the the the if they're static, they don't reflect the changing nature of the system.
Robin Hytowitz:And so I think there are men there are some tools out there that can help you kind of determine dynamic reserves, and many people are talking about it again more and more. So, yeah, it's an acknowledgment that having a a single number that doesn't change, but then having a system that does, there's a mismatch there. So but yeah. Ahmed, turn it to you too.
Emma Nicholson:Yeah. That that's a great point to bring up, and and New York ISOs are very far ahead and and looking at at dynamic reserves. And if you think, you know, in the before times when you just had thermal resources, the risk of them having a forced outage, which is essentially your one of your largest contingencies you were insuring against with your classic ancillary services was static across the day. But that's certainly not true if you have when you have weather dependent resources. And if the risk of cloud cover in the middle of the day for solar and if you're a high penetration solar system, you're going to need more potentially reserves at a certain time of day.
Emma Nicholson:And maybe in the morning and evening when sunrise and sunset, could really increase the operating reserves and other ancillaries you have to carry. But at night, you don't have to, obviously, carry reserves to manage solar output uncertainty. So that's the whole concept of moving from a static operating reserve level, where it's just set it and forget it in one year and then do another study. It's actually when your system resources the risk profile of the generation fleet I'm gonna say risk profile, their expected generation profile changes, your ancillary services should also be updated ideally to reflect those changes.
Paul Dockery:Well, think it does get into where maybe we can end it on this question, which is what when do you know if you're over or under procuring a reserve? And what like, what are you missing without without good ancillary service product definitions? Like, why is this worth scrutiny and why do we spend so much time? Why did we spend the second episode of this podcast talking about ancillary services for an hour and we could have kept going?
Emma Nicholson:I think that's a great question. And ancillary services in the before times used to be an afterthought that they just every they had tons of thermal basically, almost everything was thermal. Everyone had had room for you. They could dispatch up. And as the system changed, new operating characteristics and operational risks emerged.
Emma Nicholson:So you needed different insurance products. And what's great about ancillary services and pricing them through the market is that you send the market a signal that, hey, we really care about your ability to ramp up quickly and respond to these signals. And if you don't have some kind of mechanism through a market price to send to the system, this is something we need, this is something we value, investors won't have any idea to invest in it. And if you have a market signal, you allow the universe to invest. You could have distributed energy resources, demand response, storage, all kinds of new and innovative ways that this hopefully, the supply can come to meet these needs.
Emma Nicholson:So, you know, obviously, as an economist, I'm a very big fan of markets. You can get a lot of value out of pricing, telling the market, I have this new need, I'm going to make a product, and put this need out to market, and show you all that it's needed and valued by this system. And it is definitely, as Becky said, there's no right answer. It's a market design question. How much and so how much reserves?
Emma Nicholson:How much how much ramp? How much imbalance reserves? How much do we buy? That it's an economic trade off where, you know, if you underspend, you're gonna have blackouts, which are catastrophic and extremely costly. If you gold plate it and you have too much reserves, you're overpaying, and you're also taking out you're you're you're not leaving on a room for the market to exist if you're just gonna be layered on with insurance.
Emma Nicholson:You could have price formation challenges there. But it is definitely an important topic, especially as the grid evolves. And we all thought before there was gonna be amounts of wind and solar resources, and now with the low growth we're seeing across the country, and now that dynamic might not be the same, but as NERC has identified through the large load task force, very large loads at one location that can instantaneously disconnect from the grid, create another risk that we might need to potentially create ancillary services for too. So I think they are kind of a bellwether, an indicator of what's on your system from a generation side and from a load side. What kind of risks are you facing?
Emma Nicholson:And these products, ancillary service products, can be developed and deployed to meet those needs and signal to people kind of your what your needs are and how much the system is willing to pay for.
Robin Hytowitz:Yeah. I I was I had a couple things in mind as you were talking, Emma, and I completely echo, what you were saying. So I I think large loads was the only add on that I was gonna have, but I think you jumped in with it at the end. And large loads are especially challenging because they're both difficult as new resources that could potentially come offline. They could potentially be assets as well, but maybe they're less price driven and driven by something else.
Robin Hytowitz:And so I think there's a lot of complications that come and the implications for what what a flexible large load the implications for reserves versus a inflexible large load. So there's there's many uncertainties there in addition to the uncertainties we already have. I think one thing that we didn't get into that maybe that's for episode two is operating reserve demand curves and looking at that as a mechanism to understand, did we get the right amount? But that's for episode two. So or episode three.
Becky Robinson:I love that. You're already thinking about, right, what are when are we having you back? Happy to have you back for another another chapter. But so but just to follow-up on on that last point about large loads, right, which is getting a lot of airtime across the country. Of course, it's an extremely important issue.
Becky Robinson:But did I hear you right, Robin? Are you thinking, like, are we gonna need new ancillary services because of the, you know, new large loads coming on the systems?
Robin Hytowitz:I I would say that it's possible. Right? I think low large loads have quite a bit of uncertainty, and I'm actually curious what Emma thinks of this as well. That the because the instantiation drop of that much load is a little different, especially at its scale. Right?
Robin Hytowitz:So, you know, you can definitely have factories trip offline for various reasons, but this is a 100 factories tripping offline all at once. And so I think that that implication of the scale really makes you think, what is our largest contingency anymore? Is it the loss of a generator? Maybe, maybe not. If those but then the question kind of compounds on that if those loads are then flexible, and they have some kind of agreement ahead of time that they have this much flexibility, they can also be an asset.
Robin Hytowitz:So it's it's something that they if so you know, you can have Lowe's provide ancillary services. Right? That is an option. It is an an option that can be out there in a variety of ways with different, things on their system, whether it's behind the meter storage or other devices. So it's a question of both, do we need to change the requirement?
Robin Hytowitz:And then also, do we need to acknowledge that we need we have a lot of upward reserves, so do we need more downward reserve products? Right? If you think about spin and non spin, they're unidirectional. Right? Regulation is bidirectional, but our contingencies have been unidirectional.
Robin Hytowitz:So do we need to start thinking about a contingency an event based product that is in the other direction?
Emma Nicholson:Well, I would go back to what I said earlier in the sense that this is an engineering question at this point, because ultimately the products materialize and are born and the demand is born of an operational need that a group of very smart power system engineers and reliability engineers study, and they decide, hey, the market's not giving me this ramp right now. And then then you would hand the problems over. There's a missing need that I'm not getting. Then you would hand it off to an economist after all the engineering studies have been done and other types. Right?
Emma Nicholson:So I I frankly have no idea if they will create new ancillary services. I imagine they would, when more and more large loads, if they might be on the system, that might create, as Robin was saying, some different risks that you might, you have not previously accounted for that you need to.
Becky Robinson:This is a great concept, I think, because we've talked about, you know, the the penetration of inverter based resources, wind, solar, and and and even battery storage. Right? Inverter based resources, how that may wind and solar more on driving a driver of net load uncertainty and needing new kinds of reserves on the system to to account for that, right, and to to to balance that out. And now we're talking about what you know, this next new, you know, big trend on the grid of these large loads. And is there kind of an a needed ancillary service response to those that that is maybe related in part to, you know, can those large loads be more flexible, be more flexible loads, which I think a lot of people are talking about.
Becky Robinson:But I I like that you're pointing out too that there might separate and apart from that, you know, there might be a need to think about our do we have the services we need on the grid to accommodate for the loss of a large load potentially. Right? And that looks different than sort of a a, you know, what we typically think about as a contingency potentially. So great questions. And I like that that is, you know, potentially a new frontier of thinking about ancillary services.
Becky Robinson:Very exciting topic.
Paul Dockery:Market runs and with market awards and we end Frequency Band with segment we call Frequent Awards. So Robin, it did not go unnoticed to me that you brought in voltage and how it's all, all voltages local. So you get the coveted volt meter award, the frequency band, all free, all voltages local and all, commentary is is bespoke. Really appreciate you, Robin. Cue the mood music.
Paul Dockery:Please give us your touching speech about, anything you wanna talk about, Robin.
Robin Hytowitz:Well, that was quite moving. Thank you so much for the award. I'm thrilled to receive it on behalf of myself, my team, everyone at EPRI. I'd like to thank the the little people who made this happen now. So thank you really for it's been a pleasure to be here.
Robin Hytowitz:We're doing so many things that touch on aspects of this. In fact, one of the things, the research projects this year that we're working on is trying to understand why you need a new product, when do you need a new, ancillary service product. So, we've been diving into this quite a bit. The I'll just plug two things pretty quickly. Within my team as a whole, we're called transmission operations and planning, and our website is top.epri.com where you can find a lot of information about us.
Robin Hytowitz:Every year, our our group puts out a 600 page wholesale electricity market reference guide. We don't expect anyone to read it in its entirety, but you can think of it a little bit as a companion to FERC's electricity market primer, which, covers many aspects of what's going on at the ISOs, including some fundamentals. But we did briefly touch on large loads as well. So I would be remiss if I didn't mention that at EPRI, we have an initiative called DC Flex, which really aims to support large load flexibility on the grid. Dcflex.epri.com is our website.
Robin Hytowitz:I'm one of the leads that deals with markets, surprise, surprise, in addition to, the retail side and just kind of as a whole. So I encourage folks to if you especially, we had a nice conversation at the end about large loads. And if that's your passion, which seems to be on many people's thoughts these days, that's half of what
Emma Nicholson:I do.
Robin Hytowitz:So please feel free to reach out. Thank you.
Paul Dockery:Hey, Robin. I appreciate the speech. I hope you feel seen, heard, valued, and appreciated. Really appreciate having here.
Robin Hytowitz:We're so appreciative.
Paul Dockery:Emma, I really feel like you really held this whole conversation together and really held us up. So I'm giving you the insulator award for helping keep the, just like an insulator keeps the transmission lines connected to the tower. You kept us connected to each other. So Emma, I hope I hope you appreciate the the insulator award. Cue the mute music.
Paul Dockery:Any, any speech you wanna give on your awards.
Emma Nicholson:Thank you very much, Kaisel, Paul, Paul, and Becky for having us today. I hope that we are impressed upon the audience that ancillary services are really important, they're they're interesting and exciting. And I think they're gonna become only more important as the grid changes. And, in in terms of what what I do in the industry, I work, almost exclusively in wholesale electricity markets, but I work for a great firm called Charles River Associates. We have offices across The United I'm in Washington, DC, and it's a great place.
Emma Nicholson:We have a lot of, we do all kinds of really interesting work on modeling, market design, integrated resource planning, due diligence, and it's great to work in an industry with so many different aspects. That's really that is a really dynamic industry, and I appreciate the conversation that we had today. And, I I hope I hope folks learned something about ancillary services.
Paul Dockery:I know I did. And I do, Emma, hope you feel seen, heard, valued, appreciated. Appreciate having you here. Becky, we aren't gonna get any awards because we don't get awards for doing this. We just get the benefit of having and participating in great conversations.
Paul Dockery:I hope you feel seen, heard, valued, and appreciated. Anything you wanna close it on?
Becky Robinson:I feel great. I it's such a pleasure to have our guests on today with us, so thank you both Emma and Robin for joining for a great conversation. And I thought it was really interesting, you know, as we you know, in in the market design efforts that that we do here at the ISO as we think about what are the reserve products we have, how have we defined them, how are they meeting the needs on the grid, how might those needs change over time, and and how are how are the, you know, the clearing of these products impacting market results, and how do we get to the right answers on these things? I thought it was an insightful conversation and really appreciate it.
Paul Dockery:Thank you. It takes engineers and economists. I keep wanna say I can't say economists very well. I'm going to work on that. If I'm going to have a podcast about the physics economics and governance of the grid.
Paul Dockery:Okay. Thank you to our listeners while you aren't Cedar heard, you are valued. Appreciate it. Please subscribe like, and share on any of the podcast platforms for more people who finds ancillary service conversations interesting like us can find us keeping at what's the what's the sign off? Keeping the beat at 60 hertz?
Paul Dockery:I don't haven't found a good sign off yet. Roll on at 60 hertz enthusiasts. Roll on. We'll try that one this week.
Becky Robinson:Frequency Band is a production of the California ISO. It is produced and directed by Paul Dockery with writing by Paul Dockery and Becky Robinson.
Paul Dockery:It is mixed, edited, published by Paul Kolodich. Jamie Ackman is its editor in chief. Its executive producers include Crystal Ball, Jacob Mays, Nicole Hughes, Aaron Bloom, Deborah Smith, Monica Gaddis, and Pam Sporberg.
Becky Robinson:The views expressed during today's recording are our own and not the official views of California ISO or the official views of the organization of the guests appearing on Frequency Band. Any aggregation, quotation, or references to opinions shared in today's episode should be ascribed to the individual participants and not their respective organizations or Frequency Band. You can find additional information in the show notes of today's episode.
Paul Dockery:Frequency Band, celebrating the wonky charm of electricity markets.
Becky Robinson:Frequency Band, staying in sync at 60 hertz.