Understanding “Frequency Containment Reserve” (FCR) and its relation to EV Charging

‍Introduction to Frequency Containment Reserve (FCR)

Frequency Containment Reserve (FCR) is crucial in safeguarding the stability and reliability of the power grid. It is a mechanism for balancing the electrical system, rapidly adjusting power output or consumption in response to frequency fluctuations. This balance is vital for averting power disruptions and guaranteeing an uninterrupted electricity supply. Governed by the Commission Regulation (EU) 2017/2195, FCR is a cornerstone of the electricity balancing guidelines. These regulations aim to promote competition, fairness, and transparency in balancing markets, whilst upholding secure grid operations and consistent energy supply. As the adoption of renewable energy and electric vehicles intensifies, the role of FCR in energy markets becomes increasingly critical, highlighting its importance in modern power management strategies.

FCR Products

Frequency Containment Reserve for Normal Operation (FCR-N) and Frequency Containment Reserve for Disturbances (FCR-D) are active power reserves that are automatically controlled based on the frequency deviation. Their purpose is to contain the frequency during normal operation and disturbances. FCR-N aims to keep the frequency within the standard frequency range of 49,9 Hz to 50,1 Hz. FCR-D aims to limit the frequency deviation to 49,5 Hz or 50,5 Hz when the frequency goes outside the standard range.

FCR-N is a symmetrical product that must be capable of both up- and downregulation. Upregulation means increasing power production or decreasing consumption. Downregulation means decreasing power production or increasing consumption.

FCR-D is divided in separate up- and downregulation products. Entities that have difficulties to comply with the dynamic requirements, e.g. activation/deactivation performance and dynamic stability can provide a variant of FCR-D called “Static” FCR-D. The main difference from regular FCR-D (referred to as “Dynamic” FCR-D) is a grace period of 15 minutes where the entities are not required to deactivate and/or to be able to perform a second activation.

The mechanics of FCR in the European electricity market

In the European electricity market, the mechanics of Frequency Containment Reserve (FCR) are governed by a collaborative framework involving various Transmission System Operators (TSOs) from multiple countries. These TSOs, including those from Austria, Belgium, Czechia, Denmark, France, Germany, the Netherlands, Slovenia, and Switzerland, procure their FCR needs through a shared market. This process is conducted via daily auctions, offering four-hour symmetric products, where both upward and downward FCR are procured together. The FCR Cooperation functions under a TSO-TSO model, where a common merit order list is used to pool offers received by each TSO. Contracts and interactions with Balancing Service Providers (BSPs), however, are managed on a national level, ensuring localized responsibility and delivery. This system fosters a close collaboration among TSOs, National Regulatory Authorities (NRAs), and stakeholders, ensuring effective market design and optimization while maintaining grid security.

‍

A bit of history: evolution and expansion of FCR cooperation

The Frequency Containment Reserve (FCR) Cooperation, crucial in European power grid stability, has seen significant evolution and expansion since its inception in 2017. Initially, the collaboration involved TSOs from Austria, Belgium, Germany, the Netherlands, and Switzerland. The cooperative framework was designed in line with the Electricity Balancing Guideline, with a focus on effective market design. Since then, it has grown to include France, Western Denmark, Slovenia, and most recently, the Czech Republic in March 2023. This expansion reflects a growing recognition of the importance of coordinated efforts in grid balancing and FCR management. The cooperative's development, informed by public consultation and ongoing adaptations, underscores its commitment to maintaining grid stability across an increasingly interconnected European power system.

FCR market dynamics and procurement principles

The market dynamics of Frequency Containment Reserve (FCR) in Europe are defined by a set of carefully structured procurement principles. Participating countries, including Austria, Belgium, the Czech Republic, Denmark, France, Germany, the Netherlands, Slovenia, and Switzerland, jointly procure FCR in a common market. This market is characterized by daily auctions for symmetric products, typically spanning four hours. The minimum bid size is set at 1 MW, with a resolution of 1 MW, while indivisible bids can be up to 25 MW. The market is also regulated by specific constraints such as core shares and maximum transfer capacities, which serve as limits within the FCR market. These parameters ensure a balanced and efficient procurement process, catering to the diverse needs of the grid while optimizing costs for the cooperative as a whole

Optimization principles in FCR procurement

In the procurement of Frequency Containment Reserve (FCR), optimization principles are key to ensuring efficiency and cost-effectiveness. Daily, TSOs engage in market-based tenders, with a specific Gate Opening and Closure Time for bid submissions. The bids are then processed through an optimization algorithm, which considers various constraints like core shares, export limits, and internal limits for FCR exchange. The primary objective is to meet the demand of all participating countries while minimizing procurement costs. Under certain conditions, such as when export limits are hit, the algorithm may lead to different pricing outcomes like Local Marginal Prices (LMP) and Cross Border Marginal Prices (CBMP), ensuring that the most effective combination of bids is selected for grid stability

Special cases in FCR bidding process

The FCR bidding process encompasses special cases to address specific market scenarios. In instances where multiple optimal solutions exist for covering a country's demand, priority is given to bids from that country, limiting excessive cross-border exchanges. Furthermore, the algorithm differentiates between divisible and indivisible bids. Indivisible bids must be either fully awarded or not at all, while divisible bids allow any quantity between zero and the offered amount to be awarded. This distinction is crucial, as it prevents paradoxical rejections, ensuring that low-price bids are not overlooked in favour of higher-priced ones, thus maintaining market efficiency and fairness

FCR and EV Charging: A synergistic relationship

The integration of Electric Vehicle (EV) charging into the Frequency Containment Reserve (FCR) ecosystem presents a synergistic opportunity. EVs, with their growing prevalence, can act as a dynamic and flexible load on the power grid. Through smart charging technologies, EVs can either draw power during times of excess generation or reduce charging rates when the grid experiences high demand, thereby assisting in frequency stabilization. This bi-directional relationship not only enhances grid stability but also opens up new possibilities for EV owners and CPOs to participate in energy markets. By aligning charging patterns with grid needs, EVs effectively become mobile energy storage units, contributing to FCR mechanisms. This integration not only supports grid health but also promotes efficient energy use, paving the way for a more sustainable and resilient power infrastructure.

A BIG revenue opportunity for CPOs

FCR (Frequency Containment Reserves), or primary reserves, constitute a 300 M€ annual market if you value the total demand of the Continental European Grid (= 3.000 MW) at the average market price in Germany in 2023 (around 50 €/MW for a 4-hour block).  

In Europe, 9 countries are now sharing a common auction platform for procuring FCR, totalling around half the European demand. Each country has an own demand, depending on the country size. In addition, there are some limits to export and some core local demand to respect, leading to price differences.  

It is a relatively interesting market to follow. On the left side in the Figure below, you can see the average market prices per month and per hour (NB: the market is divided into 6 blocks of 4 hours per day) for 4 countries. On the right side, you can see the surplus, or the deficit, for the same 4 countries.

A few observations  

• France is – for now - supplying very cheap FCR

• Germany has a "solar effect"

• Since August 2023, Belgium has very expensive FCR, and constant deficit

• Netherlands is always in deficit, but prices are more aligned with Germany. Except for the time where prices skyrocketed to 77,777 €/MW on 2 November 2023 for the block 4 PM to 8 PM

Our service in the context of FCR

Our innovative offering seamlessly aligns with Frequency Containment Reserve (FCR) practices, offering a unique solution in the realm of electric vehicle (EV) charging. By deploying smart load management on all charging sites, and then aggregating them through our platform, HARMON-E, we can enable a charging operator to let EVs dynamically respond to grid needs, contributing to FCR mechanisms. This integration allows for the stabilization of grid frequency through controlled charging, making EVs an asset rather than a burden on the power grid. This is why we say that charging operators can make their network VPP (i.e. “Virtual Power Plant”)-ready, thanks to our platform.

Furthermore, our service provides real-time data and analytics, ensuring efficient energy usage and offering charging solutions providers a competitive edge. The flexibility and adaptability of our service not only support grid stability but also enhance the overall efficiency of FCR processes, marking a significant step forward in sustainable energy management.

Conclusion & outlook

In conclusion, the integration of Frequency Containment Reserve (FCR) with evolving electric vehicle (EV) charging technologies presents a promising future for grid stability, energy sustainability and in terms of new revenue opportunity for CPOs, with the total annual “Ancillary Services” market being valued at 300 Mio€.

As FCR continues to adapt and expand across Europe, its synergistic relationship with EV charging will become increasingly significant. Innovations in smart charging and energy management services, like ours, are poised to play a crucial role in this landscape.

Looking ahead, we can anticipate further advancements in grid balancing techniques, enhanced collaboration among TSOs, and more sophisticated market designs. These developments will not only reinforce grid reliability but also pave the way for a more resilient, environmentally conscious and profitable energy ecosystem.

‍