The commercial operations of the ancillary services (AS) market will guarantee the full procurement of power reserves needed by system operator National Grid Corporation of the Philippines (NGCP) in efficiently running the country’s electricity system.

After more than a decade of planning, policy framing and setting up the regulatory toolbox, the AS or reserve market finally reached its commercial operations phase on January 26 this year, as officially announced by the Department of Energy.

Following the institutionalization of the reserve market, the energy department had called on all generation companies (GenCos) with capacities capable of providing ancillary services to offer their capacities in the AS market, which now serves as an added layer of trading being done at the Wholesale Electricity Spot Market.

To date, the power reserves procurement of NGCP is still not reaching 100-percent level, but the commercialization of the AS market will already change that narrative for the grid operator.

It must be recalled that in some instances of grueling power service interruptions in recent years, lacking ancillary services procurement by NGCP had been blamed for a number of technical upsets suffered by the country’s power sector, hence, solution to that dilemma had been pushed aggressively by the Marcos administration.

Energy Secretary Raphael P.M. Lotilla highlighted that “the full commercial operations of the reserve market today is a significant step forward for the energy sector,” expounding that “this will bring efficient dispatch of all available capacities by co-optimizing the capacity and price offers for energy and reserve to ensure that the required levels for both services are always met.”

The classifications of power reserves (also generically known as ancillary services) required by system operator NGCP include: contingency and regulating reserves which are classified as primary and secondary reserves; dispatchable which is tertiary reserve; then reactive power support and blackstart as other type of reserves.

A contingency reserve is the power plant that will be ready to plug any capacity loss in the system – and often, this is equivalent to the biggest unit in a power grid; like the Dinginin power plant for Luzon.

A dispatchable reserve, on the other, is a plant that is not scheduled for regular energy supply or for the other type of AS requirements, and can immediately be dispatched to replenish the contingency reserve.

Reactive power support service accounts for the type of ancillary service to ensure technical reliability of a power system – and this is highly critical in a power market with escalating integration of renewable energy (RE) capacities; while blackstart is needed to let the grid quickly recover from a partial or total blackout.

As explained by the DOE, reserves “are services needed to maintain balance in the power system to ensure normal frequency and voltage levels in response to demand changes, variability of renewable energy, and possible loss of a large generating unit.”

The longer-term plan for the reserve market will be co-optimization on the procurement of both reserve and energy capacities, but the starting point launched this January 26 just focuses mainly on the offer of reserves capacity for the time being.

According to the industry players, if the propounded co-optimization or bundled sale of capacities will already be in place, the highly probable outcome will be lower rates that could then be passed on to the consumers.

“The reserve market aims to co-optimize energy and reserves, which may result in optimal schedules and prices for energy and reserve requirements, fostering competition and affordability while ensuring grid security and reliability,” the DOE stressed.