The potential of wind power on the Swedish ancillary service markets

Abstract: An increasing proportion of variable renewable energy in the Swedish power system is leading to greater needs of system flexibility. A key aspect of handling this is frequency flexibility where actors can either increase or decrease their production or consumption when required. This type of service is called an ancillary service and are procured by the transmission system operator in specifically designed markets. These markets are predicted to grow significantly in the coming years and there is a demand for new actors. Wind power has the capability to provide these services via pitch control of the turbines, but this has not been common practice in Sweden previously. This thesis explores the potential of wind power to enter the Swedish ancillary service markets. The overarching goal is to provide a solid introduction to the workings of the markets and how wind power can join, a description of hindrances, and what the potential financial impact on a wind farm is. First, a detailed review of the technical requirements of the markets and the price development is provided in addition to a review of similar international markets. Then an interview study is performed where actors in the wind power industry give their view on the topic. Lastly, an economic modelling of an already existing generic wind farm that is participating on the ancillary service markets FCR-N, FCR-D, aFRR Down, and FFR is presented. 2018, 2019, and 2020 as well as all four pricing areas are evaluated. The model utilizes historical wind and price data to generate a production estimation and a Monte-Carlo simulation of the estimation error is included. The interviews show that wind turbines have the capability to enter the markets but some uncertainty regarding specific technical requirements exists. Wind power owners and operators express a desire to join the markets but also a concern about profitability and future price developments. The economic modelling in the thesis shows significant opportunities to increase profitability of a wind farm by participating in the ancillary service markets during certain conditions. It identifies down regulating markets during periods of low spot prices as the main advantageous conditions for increase in profitability.