By Clara Hubert and Jonathan Hoare
What is aFRR, and how does it work?
Automatic Frequency Restoration Reserve (aFRR) is an essential component in the realm of power grid stability. It is a service designed to automatically adjust the balance between electricity supply and demand, ensuring the grid’s frequency remains within acceptable limits. Situated between the primary FCR reserve and the tertiary mFRR and RR reserves, aFRR is the secondary reserve, used to maintain the frequency of the grid in the event of a deviation in demand or supply, to ensure that the grid remains at a frequency of 50Hz. This is achieved by telling generators to either turn up or turn down, so that demand and supply match can match perfectly in real time. The aFRR is procured in France but also in other European countries.
The aFRR consists of two markets in France:
- aFRR Capacity:
- RTE (the French TSO) accepts aFRR capacity bids from generators – these are bids from generators to hold a certain part of their capacity available to either turn up or turn down generation if needed by the system.
- RTE reserves enough capacity in both directions to be able to balance a sudden shock to the system e.g. a power plant suddenly going offline.
- If you make a capacity bid and are accepted, then you must also make an energy bid.
- aFRR Energy:
- The second part of the aFRR is the Energy market, where the TSO accepts bids from plants to actively change their energy output to balance the system.
- Plants can bid to either turn up or turn down their generation in a given period, and the TSO will activate as many bids as necessary to balance the demand and supply in the energy system.
These bids are managed on a national level by RTE, which monitors the grid frequency in real-time. When a change in frequency is detected, the TSO calls upon the reserved capacity to change their production to meet the imbalance – this can come from power plants, battery storage, or any flexible system. The grid balances across all of Europe, and power flows for balancing between countries are managed by the PICASSO platform.
Recent Changes and Upcoming Modifications
The aFRR platform is not fully finalised in France, and there are changes that have happened recently or that are upcoming that present exciting opportunities for flexible assets.
- Recent Changes:
- In November 2023, the aFRR energy procurement in France moved from a regulated service to an open market. This means that, instead of the TSO fixing the price each year for aFRR energy balancing, the price in each period will be settled in a free market, allowing balancing providers to compete to provide the service and to balance the system at the optimal price. Since it started in November 2023 (until the end of May 2024), the turn-up and turn-down balancing prices have been 94.8 €/MWh and 7.8 €/MWh respectively.
- Upcoming Changes:
- Currently, the aFRR Capacity market is regulated in terms of price and volume by the TSO, with obliged market participants having to contribute some of their capacity to meet the TSO’s demand.
- On the 18th of June 2024, the French TSO will open daily auctions for aFRR capacity provision, ending regulation of the service. Generators will be remunerated to reserve some of their capacity upwards or downwards based on bids in a free market, which will make aFRR capacity more flexible and efficient. Obligated market participants (which includes large generators) will still have to commit some of their capacity to the auction after this change.
How Does aFRR Work in Practice?
In practise, the aFRR closes in two parts – the aFRR capacity auction and the aFRR energy auction:
- The aFRR capacity auction closes at 9 am the day before delivery.
- Currently, plants prescribe daily capacity based on a regulated symmetric capacity payment and a regulated price
- However, after the 18th June plants bid their capacity in 1h blocks in either the turn-up or turn-down direction, based on the opportunity cost of holding such capacity for the aFRR – these auctions are asymmetrical but symmetrical bidding is allowed.
- The required capacity is determined by the TSO for all hours of the day in 2-hour blocks for each quarter of the year, split between working and non-working days
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- The bids from the plants are then auctioned off for each hour to provide sufficient capacity.
2. aFRR Energy Delivery:
- The day is divided in 96 15-minute delivery blocks and generators can submit bids for each period. These dayahead bids can then updated until 25 minutes before delivery on the day.
- Within each period, these bids are activated every four seconds based on imbalance in that four-second period – meaning there is a new price and new required balancing volume every four seconds!
- Once a bid is activated, the asset has 400 seconds to fully activate the required energy (moving to 300 seconds from the 18th December 2024)
Ni level is an indicator of the level of activation of the aFRR energy bid ranking between 0 and 1. For example battery bid = 10MW, if the Ni level is 0.1, the battery will be activated for 1MW. 2) FAT = Full activation time 3) DAT = Deactivation time (300s from 18th December 2024)
What’s Next? The PICASSO Project
Currently in France, aFRR Energy is reserved on the national level to perform frequency balancing in France. However, from November 2024, France intends to connect to the European PICASSO Project (Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation), which connects European markets and allows them to trade aFRR balancing across borders. This will allow more, easier cross-border aFRR trades, and optimisation of aFRR resources to the most efficient way to balance the system.
Impact on Battery Business Cases
Overall, these developments in the aFRR market are positive for battery business cases. The aFRR energy market has already unlocked an additional lucrative revenue stream for batteries, and the opening of the aFRR capacity market will be a further benefit as they will be able to reserve their capacity in both directions in the market.
If you want to know more about the aFRR market, Aurora’s forecast for aFRR Capacity and Energy Prices, as well as access all of our analysis on French balancing markets, then please reach out to our team, Humberto Medrano: humberto.medrano@auroraer.com
