Allocation of ancillary service costs to diverse consumers in China: A comprehensive survey and mechanism design

Abstract Ancillary services are crucial for supporting the reliable operation of power systems and constitute an integral part of the power market. The increasing integration of volatile renewable energy sources has introduced new challenges into China's traditional ancillary service markets, such as escalating ancillary service costs. Historically, the ancillary service cost‐sharing approach in China has been a redistribution of revenue among generators, resulting in increasing cost‐sharing pressure on the supply side. Therefore, based on the basic market logic of ‘who causes the demand, who pays,’ sharing the ancillary service costs with power consumers becomes urgent. This paper presents an overview of the latest research and practical experiences in China and other countries, and proposes an ancillary service cost allocation mechanism considering the participation of consumers. First, the ancillary service cost allocation mechanisms in China and other countries are summarized, including common rules and individual characteristics. Subsequently, a framework for the rights and responsibilities associated with ancillary services is systematically outlined from a market design perspective. Moreover, an ancillary service cost allocation mechanism was introduced based on the principle of ‘common but differentiated responsibilities (CBDR).’ Finally, the construction path of the ancillary service cost allocation mechanism under the new round of power industry reforms was proposed. The findings summarized in this study can promote the reasonable allocation of ancillary service costs and improve the flexibility of power systems and the consumption of renewable energy.