Remuneration of Ancillary Services from Microgrids: A Cost Variation-Driven Methodology

Yeferson Lopez Alzate, Eduardo Gómez-Luna and Juan C. Vasquez ()
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Yeferson Lopez Alzate: Grupo de Investigación en Alta Tensión—GRALTA, Escuela de Ingeniería Eléctrica y Electrónica, Universidad del Valle, Cali 760015, Colombia
Eduardo Gómez-Luna: Grupo de Investigación en Alta Tensión—GRALTA, Escuela de Ingeniería Eléctrica y Electrónica, Universidad del Valle, Cali 760015, Colombia
Juan C. Vasquez: Center for Research on Microgrids (CROM), AAU Energy, Aalborg University, 9220 Aalborg, Denmark

Energies, 2025, vol. 18, issue 19, 1-30

Abstract: Microgrids (MGs) have emerged as pivotal players in the energy transition by enabling the efficient integration of distributed energy resources and the provision of ancillary services to the power system. Despite their technical capabilities, MGs still face economic and regulatory barriers that hinder their widespread deployment in electricity markets. This paper presents a structured methodological framework to assess the economic viability of MGs delivering services such as peak shaving, loss compensation, and voltage support, among others. The proposed approach considers three distinct scenarios: (1) MGs supplying energy to local loads, (2) hybrid MGs combining local supply with ancillary services, and (3) MGs exclusively dedicated to ancillary services. The framework incorporates adjusted levelized cost of electricity (LCOE), levelized avoided cost of electricity (LACE), and net value metrics, while accounting for tax incentives and market price signals. A case study based in Colombia (Cali and Camarones) validates the framework through simulations conducted in HOMER Pro V3.18.4 and MATLAB Online. The results indicate that remuneration schemes based on availability and service utilization significantly enhance the viability of MGs. The proposed methodology is applicable to emerging regulatory environments and offers guidance for designing public policies that promote the active participation of MGs in supporting grid operations.

Keywords: microgrids; ancillary services; cost-variation method; distributed generation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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