Ancillary services | The Outlet — Pilot Energy

The short version

Every second, the grid operates at a knife's edge: supply must exactly equal demand, or frequency drifts from its nominal 60 Hz. A fraction of a hertz too high or too low, and protection systems begin tripping generators and loads. Sustained deviation causes cascading failures — the kind that produce large-scale blackouts.

Ancillary services are the suite of grid support products that prevent this from happening. They are procured separately from energy, priced in their own markets, and increasingly provided by batteries, demand response, and distributed resources alongside traditional thermal generators.

Frequency regulation

Regulation is the fastest and most continuously active ancillary service. Resources providing regulation respond to an automatic generation control (AGC) signal from the ISO every 2–4 seconds, ramping output up or down in real time to keep frequency at 60 Hz. A regulation resource might ramp up and down dozens of times per hour, never holding a steady output level.

Battery storage has become the dominant provider of regulation in many markets — particularly PJM's RegD signal, which favors fast-responding resources. CAISO's frequency regulation market has seen similar trends. The payment structure typically includes a capacity payment for being available plus a performance payment based on how accurately the resource tracks the AGC signal.

Operating reserves

Spinning reserves (synchronized reserves) are generation capacity already online, synchronized to the grid frequency, and able to ramp to full output within 10 minutes. Because they're already spinning, they can respond almost instantly to a sudden generation loss and provide inertial response during the initial seconds of a frequency event.

Non-spinning reserves (supplemental reserves) can be offline but must start and deliver power within 10–30 minutes depending on the market. They're less valuable than spinning reserves — hence a lower clearing price — but provide a deeper backstop for larger contingencies.

Reserve requirements are set by NERC reliability standards and vary by ISO. Most systems carry spinning reserves equal to the single largest contingency — typically the loss of the largest generator on the system.

Other ancillary services

Voltage support and reactive power maintains voltage within acceptable ranges across the transmission network. Reactive power can't be economically transmitted over long distances, so voltage support must be provided locally. It's often procured through cost-of-service arrangements with nearby generators rather than competitive markets.

Black start capability is the ability to restart without an external power source — critical after a widespread outage. Only certain generators (typically hydro, diesel, or specially equipped gas turbines) have this capability, and ISOs pay a separate capacity payment to maintain it.

Co-optimization with energy

Modern ISOs solve energy and ancillary service procurement simultaneously — a process called co-optimization. A generator committing capacity to spinning reserves forgoes the opportunity to sell that capacity as energy. The co-optimized solution finds the least-cost mix of energy and ancillary services, with opportunity cost payments ensuring resources are indifferent between products at the margin.