A simple probabilistic approach for the power-reserve pricing

The paper presents several simple probabilistic methods for the power-reserve pricing of frequency control. These methods are well suited to small power systems, where an insufficient number of potential bidders makes an ancillary-services market difficult to organize. The proposed pricing methods are meant for estimating the annual costs for power-reserves procurement when these reserves are procured on the basis of bilateral contracts. They can also provide a basis for ancillary-services market design. The proposed pricing methods are applied to the Slovenian power system.