EXPLANATORY MEMORANDUM ON

INTRODUCTION OF ANCILLARY SERVICES IN INDIA

I. BACKGROUND:

1.0 Ancillary services

1.1 Power systems require ancillary services to maintain reliability and support their primary
function of delivering energy to customers. Ancillary services are principally real-power
generator control capacity services the system operator uses over various time frames to
maintain the required instantaneous and continuous balance between aggregate generations
and load. Ancillary Services consist of services required for:

a) Maintaining load – generation balance (frequency control)

b) Maintaining voltage and reactive power support

c) Maintaining generation and transmission reserves

1.2 Ancillary Services are broadly classified as follows:

a) Frequency Control Ancillary Services: Three levels of Frequency Control are

generally used to maintain the balance between generation and load i.e. Primary
Frequency Control, Secondary Frequency Control, Tertiary Frequency Control. Three
levels differ as per their time of response to a fluctuation and the methodology
adopted to realize the fundamental operating philosophy of maintaining reliability and
overall economy.

b) Network Control Ancillary Services (NCAS): This can be further subdivided into (i)
Voltage Control Ancillary Service and (ii) Power Flow Control Ancillary Services,

c) System Restart Ancillary Services (SRAS): is used to restore the system after a full or
partial blackout. Black start is a vital but inexpensive service. Its costs are primarily
the capital cost of the equipment used to start the unit, the cost of the operators, the
routine maintenance and testing of equipment and the cost of fuel when the service is
required. At present this is a mandatory service. However, in future, this may be
required to be introduced to incentivize generators to provide this service.

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1.3 These Ancillary services are not new. Till now the functions have been provided by
vertically integrated utilities. With restructuring it has become necessary to more carefully
define, measure, and pay for these services. Ancillary services introduce an additional level
of complexity and the potential for additional revenue for generation owners.

1.4 Section 5.2.3 of the National Electricity Policy (NEP) mandates that adequate reserves may
be maintained to ensure secure grid operation (extract given below).

“5.2.3 In order to fully meet both energy and peak demand by 2012, there is a need to
create adequate reserve capacity margin. In addition to enhancing the overall availability
of installed capacity to 85%, a spinning reserve of at least 5%, at national level, would
need to be created to ensure grid security and quality and reliability of power supply.”

1.5 The CERC Power Market Regulations 2010 has made provisions for introduction of the
Ancillary Services in the Indian Electricity Market in the future. Regulation 4(viii) defines
Ancillary Services as follows:

“Ancillary Services Contracts – These contracts are for ancillary services. Ancillary
Services in power system (or grid) operation are support services necessary to support the
power system (or grid) operation for maintaining power quality, reliability and security of
the grid, e.g. active power support for load following, reactive power support, black start,
etc.”
Further, Regulation 8 provides that the Ancillary Services Market would be introduced by
CERC at a later date.

One of the objectives of the IEGC, as given in Regulation 1.2 is the “Facilitation for
functioning of power markets and ancillary services by defining a common basis of
operation of the ISTS, applicable to all the Users of the ISTS”.

1.6 Ancillary services have been discussed for introduction in the Indian Power Sector as given
below:

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 a) November 2010: NLDC petition (351/2010) filed for Frequency Support Ancillary
Services (FSAS) before CERC

b) March 2012: Discussion in 16th Meeting of the Central Advisory Committee

c) June 2012: Workshop conducted by the Forum of Load Despatchers (FOLD)

d) July 2012: CERC directs Staff for draft Regulation on Ancillary Services

e) April 2013: CERC Staff paper on Ancillary Services

1.7 A number of issues pertaining to introduction of Ancillary Services Market were discussed
during the above stakeholder consultations.

1.8 The NEW and SR Grid, which were connected asynchronously through HVDC links, have
been synchronously connected in December 2013. The large interconnected power system of
the country has facilitated economy interchange and cheaper power is replacing costlier
power. Given the fact that a vibrant electricity market is functional, it is extremely essential
to ensure secure grid operation and hence there is a need for introduction of ancillary
services.

1.9 Renewable energy generation is variable in nature (diurnal & seasonal) and implementation
of ancillary services would facilitate integration of renewable energy generation in the
country. Ancillary services will certainly help in controlling the variability of renewable
generation, presently concentrated in certain parts of the country, however other suitable
mechanisms like more frequent market clearing, new market products are required. Also,
Grid scale Storage system e.g. Pumped Storage Plants are required for balancing renewable
sources of energy.

II. Frequency Control in India

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 2.0 System frequency is a fundamental indicator of power system health. It can be observed
everywhere on the power system and provides an immediate indication of the balance
between generation and load. Frequency drops when load exceeds generation and rises
when generation exceeds load. Large frequency deviations result in equipment damage and
collapse the power system. Therefore, frequency is needed to be tightly controlled.
Following controls are required that provide the system operator to maintain the
instantaneous and continuous balance between generation and load and to manage
transmission line flows.

2.1 Primary Control

Continuous load changes result in mismatch of generation and load leading to variation in
frequency of interconnected power system. Keeping governors free to operate would
enable smooth control of frequency fluctuations as well as security against grid
disturbances. Time frame for primary governor control action is about a few seconds i.e. 2-
5 seconds. However, in India in the past due to wide variation in frequency fluctuations,
Free Governor Mode of Operation (FGMO)/ Restricted Governor Mode of Operation
(RGMO) has faced difficulties in operation. Experience around the world is that primary
frequency control by governors coupled with other controls are necessary to maintain
frequency within strict limit.

All large generating plants i.e. 200 MW and above, as per IEGC-2010 must be on restricted
governor mode of operation. Generating units in these plants must have working governors
which respond to change in frequency by controlling steam and water to the turbine with a
standard droop (between 3-6%). For primary control to work properly most of the
generations have to be under governor control so that adequate primary reserve is available
at all times.

2.2 Secondary Control

If the load generation imbalance caused by an outage of large generator or load causing
sudden variation in frequency of interconnected power system, primary response through
governor action described above would help arrest the change fall in frequency. However,
the frequency has to be brought back to 50 Hz through corrective action taken by the
Control Area within which the generation or load is affected. Supplementary corrective

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 action or secondary control has to be taken to bring frequency back to 50 Hz. For large
interconnection system this automatic secondary control is known as Automatic Generation
Control (AGC). Time line of secondary control action is a few minutes. Secondary control
is absent by design in the Indian grid. Roadmap for introduction of secondary control in
India needs to be devised at the earliest considering the 135 GW peak load system
operating as a single grid. The implementation of secondary control requires that all
generating units (above the required size) are under primary governor control. They should
also be made ready to receive the control signal from the AGC software being run at the
control centre to the governors through appropriate communication & control infrastructure
for implementing AGC. Secondary control also requires that each area control centre
(SLDC) must have the AGC software as well as the ability to send the control signal.

2.3 Tertiary Control

Loss of large generator (or load) may cause a large enough system excursion that cannot be
handled by regulatory reserve alone. The above secondary control reserves also needs to be
restored through tertiary reserves. Tertiary reserve provides significant insurance against
wide spread outages. Tertiary reserve had been a luxury in our system that was perennially
short of generation. Since generators reserve situation is getting better, it is proposed to use
such surplus reserve by procuring and compensating tertiary reserve to start with.

2.3.1 It is proposed that to start with all Inter-State Generating Stations (ISGSs), including Ultra
Mega Power Plants (UMPPs), operating on part load and have not received requisition and
whose tariff is determined by the Central Commission, may be mandated to participate in the
tertiary frequency control support services.

2.3.2 Presently, generation in some of the Inter-State Generating Stations is not getting
dispatched as it is not getting requisitioned by the beneficiaries based on merit order
considerations. Table – 1 below shows the reserves on account of un-requisitioned
generation capacity that are typically available for dispatch.

Table - 1: Typical Reserve Available on Account of Un-requisitioned Generation

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 Capacity
2014-15 (upto Jan - 2015) Average
Installed
Capacity Availability PLF Difference
Reserve
(%) (%) (%)
(MW) -1 -2 (1-2) MW
Northern Region
ANTA GPS 419 94.82 48.41 46.41 194
AURAIYA GPS 663 88.19 28.66 59.53 395
DADRI GPS 830 95.18 35.74 59.44 493
DADRI NCTPS-I & II 1820 98.71 85.86 12.85 234
APCPL Jhajjar 1500 80.52 56.56 23.96 359
RIHAND STPS 3000 83.47 80.05 3.42 103
UNCHAHAR TPS 1050 93.64 87.37 6.27 66
TOTAL 1844
Eastern Region
Farakka STPS 2100 83.13 77.99 5.14 108
Kahalgaon STPS 2340 87.93 76.81 11.12 260
TOTAL 368
Western Region
VSTPS 4260 85.21 78.71 6.5 277
KAWAS 656 92.71 31.78 60.93 400
GANDHAR 657 90.69 30.97 59.72 392
SIPAT-II 2980 88.44 82.76 5.68 169
Mundra UMPP 4000 78.44 75.58 2.86 114
Mauda 1000 79.73 28.33 51.4 514
RGPPL 2220 35.48 0 35.48 788
TOTAL 2654
Southern Region
NTPC,RAMAGUNDAM 2600 91.32 88.97 2.35 61
NTPC, SIMHADRI-II 1000 86.15 81.48 4.67 47
TOTAL 108
All India 4974
Source: As per REA (Prov.) issued by respective RPCs for Jan – 2015.

2.3.3 As per Central Electricity Regulatory Commission (CERC) orders, the despatch of such
un-requisitioned surplus can be done if one of the other beneficiaries requisitions the power.
Alternatively, the generator can sell the un-requisitioned power to others through Short Term
open Access. However, there are issues regarding proper load forecasting, duration for

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 requisitioning power and timely information dissemination. The NLDC website is presently
displaying the total quantum of un-requisitioned surplus on station wise basis for the current
day. Hence, in addition to the existing mechanism of dispatching the un-requisitioned
surplus, it is proposed to utilize this under Ancillary Services also. Such Ancillary Services
may be known as Reserves Regulation Ancillary Services (RRAS).

2.3.4 Analysis of international experiences reveal that the Ancillary Service products (viz.
Primary Response / Regulating Reserve; Spinning / Operating Reserve; Demand Response;
Voltage Control; Black Start etc.) are chiefly market driven. In such markets, generally,
there are assured commitment charges payable to the Ancillary Service providers as they are
committing their capacity for such services. In some countries the system operator
anticipates Ancillary Services in advance, and factors in the commitment charges towards
Ancillary Services in their Annual Revenue Requirement (ARR) / Rate Base. Thus, the
liability towards the commitment charges is socialized while the energy charge component of
Ancillary Services is passed on to the specific entities responsible for causing the requisition
of Ancillary Services.

2.3.5 The Commission has noted these practices and feels that while the international experience
calls for Ancillary Services to be purely market based instrument, it would be desirable to
move in a calibrated way in so far as introduction of Ancillary Services in India is concerned.
This is primarily due to the fact that the cost of socialization of availing Ancillary Services is
a major issue, in India, unlike the same in developed electricity markets. It is, therefore,
proposed to start by way of utilizing un-requisitioned surplus (URS) of inter-state generating
stations (ISGSs) as Ancillary Services to support grid operation. The proposed framework is
outlined in subsequent sections.

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III. PROPOSED FRAMEWORK FOR ANCILLARY SERVICES IN INDIA

3.0 Objectives of proposed Ancillary Services

Objective of proposed Reserves Regulation Ancillary Services (RRAS) is to restore the

frequency level at desired level and to relieve the congestion in the transmission network.
The RRAS shall support both regulation up and regulation down service. Provision for
the regulation down service is being made with the objective of facilitating
pumping/motoring operation of the pumped storage plants and integration of renewable
sources.

3.1 Nodal Agency

3.1.1 System operator, namely National Load Despatch Centre (NLDC) through the Regional
Load Despatch Centres (RLDCs) shall be the nodal agency for implementation of the
ancillary services at the inter-state level. At the intra state level, the State Load Despatch
Centre (SLDC) would be the nodal agency as and when such services are introduced by
the SERCs.

3.2 Ancillary Market Participants

3.2.1 All Inter-State Generating Stations whose tariff is determined or adopted by the
Commission and are operating on part load and have not received full requisition shall be
eligible to participate in the Reserves Regulation Ancillary Services Market.

3.2.2 The RRAS provider should submit on monthly basis, details of fixed charge, variable
charge and any other statutory charges as per the CERC Regulations, to the Regional
Power Committees who in turn shall intimate the same to the Nodal Agency for merit
order dispatch. The Regional Power Committee (RPC) would use these figures for
preparation of deviation Accounts also with ancillary service schedule indicated
separately.

3.3 Role of Nodal Agency

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3.3.1 NLDC, the Nodal Agency, shall prepare merit order stack of un-requisitioned surplus of
ISGSs willing to participate in this mechanism, based on the variable cost of generation,
Declared Capacity and take despatch decision. The stack would be made region-wise /
bid area-wise to factor in transmission constraints on any inter-regional or area boundary.

3.4 Kick in by NLDC based on contingency

3.4.1 Nodal agency shall stack un-requisitioned surplus capacities available from ISGS based
on lower generation Cost to higher generation cost in each time block.

3.4.2 Nodal agency shall direct the selected RRAS providers for regulation up and regulation
down, as and when requirement arises in the system. The requirement may arise on
account of any of the following events (indicative list only) as may be decided by the
Nodal Agency:

i. Extreme weather forecasts and/or special day;

ii. Multiple generating unit or transmission line outages;
iii. Trend of load met;
iv. trends of frequency;
v. Intimation of any abnormal event such as outage of hydro generating; units due to
silt, coal supply blockade etc.;
vi. Excessive loop flows leading to congestion; and
vii. Such other events.

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3.5 Dispatch of proposed service

3.5.1 Once the time period specified by the Nodal Agency starts, ancillary service will be
deemed to have been triggered.

3.5.2 RRAS provider will inject or back down the generation as per quantum and time
specified by the Nodal Agency.

3.5.3 The schedules of the RRAS providers would be considered as revised by the quantum
specified by the nodal agency. The deviations beyond this revised schedule would be
treated as per CERC DSM Regulations.

3.6 Withdrawal of Ancillary service

3.6.1 The Nodal Agency, on being satisfied that the circumstances leading to triggering of
RRAS, no longer exist, shall direct the RRAS provider to withdraw from the time block
specified in the detailed procedure. For this, the Nodal Agency shall monitor the
frequency during continuous low frequency period, contingency period, loading on tie
line etc.

3.7 Energy Accounting

3.7.1 Energy Accounting shall be done by the respective RPC on weekly basis along with UI or
DSM statement on the basis of SEM data and schedule.

3.7.2 The RPC shall issue an Ancillary Services Statement along with DSM deviation
statement account.

3.8 Settlement

3.8.1 The settlement shall be done by the RLDC similar to that of UI account under additional
head of Ancillary Services.

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3.9 Scheduling of RRAS

3.9.1 The quantum of generation dispatched shall be directly incorporated in the schedule of
respective RRAS providers. For up-regulation, power would be scheduled from the
generator to the pseudo-entity “pool” by the RLDC concerned. Similarly, for down-
regulation, power would be scheduled from the “pool” to the generator, so that effective
scheduled injection of the generator comes down.

3.9.2 Separate statement shall be maintained within the Regional DSM Pool Account for
RRAS.

3.9.3 The payment to RRAS provider would be from the Regional DSM Pool Account.

3.9.4 Payment to the generators under RRAS would be on the basis of the scheduled quantum
and any deviation would be handled through DSM Regulations. Sustained failure to
provide the Regulation Reserves by any generator (barring unit tripping) would lead to
stringent penalties on account of gaming.

3.9.5 No commitment charges would be payable to the RRAS providers for making themselves
available in the RRAS market.

3.9.6 The energy despatched under RRAS would be deemed to be delivered at the Regional
periphery. Under/over injection by the RRAS provider to be treated as per the CERC
Unscheduled Interchange / Deviation Settlement Regulations.

3.9.7 Any deviation by the RRAS provider would be accounted for through the imbalance
handling mechanism.

3.10 Detailed Procedure

3.10.1 The nodal agency shall after obtaining prior approval of the Commission, issue the
detailed procedure to operationalise Ancillary Services at inter-state level and on any
residual matter not covered under these regulations.

3.11 Commercial mechanism

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3.11.1 The RRAS provider shall be paid at their fixed and variable charges, with a mark up as
decided by the Commission through a separate order from time to time, in case of
regulation up services for the quantum of RRAS scheduled. However, the RRAS provider
shall refund back the fixed charges to the original beneficiaries in proportion to the
quantum surrendered from the generating station.

3.11.2 The RRAS provider shall pay variable charges to pool in case of regulation down of the
generation.

3.11.3 A Flowchart for Operationalization of Ancillary Services Framework alongwith stepwise

description of each activity is placed at Annexure – I.

IV. Simulation Studies

4.0 Sample Simulation studies to assess the impact of despatch of Ancillary Services were
done. The findings are placed at Annexure – II.

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 Annexure-I

Flowchart for Operationalization of Ancillary Services Framework

Start

Step‐2:
ISGS/Participating Generator to submit 
variable and fixed charges (Periodicity  – 
Monthly)

Step‐3:
Verification / vetting of Variable Charges of 
ISGS by RPC.
RPC to communicate VC/FC to NLDC

Step‐4:
Preparation of Merit Order Stack of URS 
capacities by NLDC

No
Step‐4:
Has any contingency condition to kick in 
Ancillary Services been met?

Yes

Step‐5:
Kick in instructions to Ancillary Services 
Provider by NLDC/RLDC

Step‐6:
Dispatch instructions to Ancillary Services 
Provider by RLDC

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 Step‐7:
ASP to inject as per instructions

No
Step‐8:
Whether condition to withdraw Ancillary 
Service has been met?

Yes

Step‐8:
Withdraw instructions by NLDC/RLDC to 
ISGS/POOL

Step‐9:
Generator to send SEM Data to RLDC

Step‐10:
Actual Generation (SEM) Schedule and cost 
data to be considered by RPC for DSM/AS 
statement

Step‐11:
RPC to prepare and issue DSM Account and AS 
Account Statement (Weekly)

Step‐12:
NLDC to prepare Billing Statement and send to 
RLDC (Weekly)

Step‐13:
RLDC to furnish payment instructions  / 
disbursement statement to ISGS (Weekly)

End

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 Annexure – II

Simulation studies to assess impact of despatch of Ancillary Services

Introduction
A sample case study to understand the implications of introduction Regulation Reserve
Services (“Ancillary Services”) was carried. It was decided to carry out mock study for
ancillary service in Northern Region for the week 16-22 June, 2014 to improve system
frequency and relieve the system constraints due to loss of generation at Napth Jhakri
as mentioned below:
• Karcham Wangtoo ( 900 MW), Nathpa Jhakri ( 1600 MW) and Rampur (206
MW) HEPs were taken out of service in 6 time blocks i.e. from 1030 hrs to 1200
hrs on 18.06.2014 in Northern Region due to high silt level with a total generation
loss of about 3000 MW;
• Consequently, the frequency dipped from around 50.1 Hz to 49.7 Hz which
constrained to do load shedding in the state of Uttar Pradesh, Haryana and other
constituents;
• The inter-regional drawal of Northern Region increased by 1500 MW in this
period with drawal from ER increasing by around 300 MW and drawal from WR
increasing by 1200 MW.

Ancillary Service
The following aspects have been considered for the study:
• Un-requisitioned Surplus (URS) power of 691 MW of Auraiya RLNG and Dadri
RLNG was kicked in on 18th June 2014 during time blocks from 56(1345-1400) to
59(1430-1445) [total one hour];
• URS of 691 MW was scheduled to the dummy entity in Northern Region;
• The frequency in each block was increased by 0.18 HZ on the basis of Power
Number (3%);
• The drawal of each state was increased by 0.54% (0.18x3%) of demand being met
considering the improvement in system frequency;

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 • The impact on the unscheduled interchange charges payable by the NR
beneficiaries vis-à-vis actual cost of power kicked into the system has been
worked out through the weekly UI computation.

Implication:
• The variable cost and fixed cost of RLNG power are considered as Rs 6 and Re 1
respectively. The total cost of power pumped into the system has been worked
out as 48.37 Lakhs.
• The pool balance has been reduced by 47 Lakhs (Annexure II(a), II(b) and II(c)).
• DSM charges payable by the beneficiaries has reduced by 87 Lakhs (including UI
charges and additional UI charges).
• Amount payable to WR and ER DSM Pools has gone down due to dispatch of
additional power in NR.

Inferences
The system security has been attained by way of increase in system frequency as
well as reduction in power flow through WR-NR, for which URS of 691 MW at a cost of
48 lakhs has been utilized . At the same time, the liabilities of beneficiaries on account
of deviation mechanism have reduced by 87 Lakhs due to increase in frequency. The
generating stations will be benefited by getting dispatch and with improved operational
parameters. The beneficiaries will be benefited through reduction of deviation charges.
The study indicates that the generating companies as well as beneficiaries will be
equally benefited.

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 Annexure II(a)

Computation without Regulation Reserve Service

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 Annexure II(b)

Computation with Regulation Reserve Service

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 Annexure II(c)
Impact on UI Charges

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