Market of auxiliary services (RDP):
How to sell the "speed" of the reaction?
For the stability of the power system, the current frequency must be strictly 50 Hz. Any deviation -- even by 0.1 Hz -- requires immediate compensation. It is for this "immediacy" that Ukrenergo pays the most money. And this is where BESS (Battery Energy Storage System) has an absolute competitive advantage over any other type of generation.
How balancing works: Frequency 50 Hz
The electric network works according to the principle of instantaneous balance: every second, the amount of generation must be exactly equal to the amount of consumption. If the consumption exceeds the generation (for example, a large industrial line is switched on), the frequency starts to drop below 50 Hz. If the generation exceeds the consumption (a cloud has passed, the SES suddenly added power), the frequency increases above 50 Hz.
The permissible range of deviations in the unified European network ENTSO-E (to which Ukraine seeks to integrate) is 49.8-50.2 Hz for normal operation. At an output of 49.0-51.0 Hz, cascading shutdowns, protective shutdown of generators, and in extreme cases - a complete blackout begin.
A real example: On January 8, 2021, the European energy system split into two parts due to the shutdown of a substation in Croatia. The frequency in the southeastern part dropped to 48.75 Hz. Only the quick operation of frequency regulation systems (including BESS) prevented a complete blackout for 200 M consumers. The incident spurred investment in BESS across Europe.
In Ukraine, the situation is more complicated: due to the destruction of a large part of generating capacities and the unevenness of RES (wind and solar generation), the frequency is unstable, which creates a huge demand for balancing services. This is a window of opportunity for BESS investors.
Types of reserves: FCR, aFRR, mFRR, RR
According to the ENTSO-E regulations and the Transmission System Code (approved by NERCP), there are four levels of grid balancing reserves. Each has its own requirements for response speed, duration and type of equipment.
FCR -- Frequency Maintenance Reserve
Reaction: up to 30 seconds (BESS gives less than 1 second)
Duration: at least 15 minutes
Activation: automatic, by frequency deviation
Payment: the highest -- capacity (readiness) fee + activation fee
BESS participation: perfect fit, best market
aFRR -- Automatic Frequency Recovery Reserve
Reaction: up to 5 minutes (full activation)
Duration: up to 15 minutes
Activation: automatic, according to the operator's signal (AGC)
Payment: high -- power + energy
BESS participation: great fit
mFRR -- Manual Frequency Recovery Reserve
Reaction: up to 15 minutes
Duration: up to 60 minutes or more
Activation: at the command of the dispatcher
Payment: average
BESS participation: suitable for 2+ MW*h systems
RR -- Replacement Reserve
Reaction: up to 30 minutes
Duration: hour|no
Activation: by schedule or command
Payment: lower than other reserves
BESS participation: less profitable, requires a large capacity
Response speed: BESS vs traditional generation
Time to reach the rated power from the dispatcher's signal. BESS wins by orders of magnitude.
Auction system of Ukrenergo
Ukrenergo purchases balancing services through competitive auctions on a specialized platform. The mechanism is built according to the pay-as-bid model (each participant receives his price) of elements of marginal pricing for individual products.
How auctions work
- Periodicity: daily auctions for FCR/aFRR (day-ahead), weekly for mFRR
- Minimum lot: 1 MW for FCR, 1 MW for aFRR
- Price cap (limit prices): NKREKP are established and revised quarterly. As of 2025 - up to UAH 4,500/MW*h for FCR
- Two streams of income: payment for readiness (capacity payment, UAH/MW/h) and payment for activation (energy payment, UAH/MW*h of actually supplied/absorbed energy)
- Penalties for non-compliance: if the system did not work as required, the fine is 150-200% of the capacity payment for the relevant period
Critically important: participation in auctions requires prior equipment qualification at Ukrenergo. The qualification procedure includes a series of technical tests confirming the ability of the system to meet the requirements of a specific type of reserve.
Real examples of BESS in the market of auxiliary services in Europe
Hornsdale Power Reserve, Australia
Power: 150 MW / 194 MW*h (Tesla Megapack)
Year of introduction: 2017 (2020 extension)
Result: Earned $150M+ in the first 2 years in the frequency regulation and arbitrage market. Reduced the cost of FCAS services in South Australia by 91%. It paid off in 2.5 years instead of the planned 4.
Pillswood, United Kingdom
Power: 98 MW / 196 MW*h (Fluence)
Year of introduction: 2023
Result: One of the largest BESS in Europe. Works on FFR (Firm Frequency Response) and Dynamic Containment markets. Estimated revenue -- $45M/year with CAPEX $130M.
FCR market of Germany
Total power of BESS: 1.2+ GW (as of 2025)
Average price of FCR: 8-15 EUR/MW/h
Trend: Prices have decreased from 25 EUR (2019) to 8-12 EUR (2025) due to increased competition, but BESS remains profitable due to revenue stacking.
Economics: Financial model of 1 MW BESS
Not every battery will pay off in the aftermarket. We will provide a detailed calculation for a typical project in Ukrainian realities.
Financial model: 1 MW / 2 MW*h BESS (LiFePO4)
Costs (CAPEX + OPEX)
Battery module (LFP): $280,000
PCS (inverter/converter): $80,000
Transformer + PKU: $45,000
BMS + EMS + SCADA: $35,000
Container + HVAC: $40,000
Design + installation: $50,000
Qualification of Ukrenergo: $15,000
Total CAPEX: $545,000
O&M per year: $18,000 (3.3% of CAPEX)
Insurance: $8,000/year
Revenue
FCR (capacity): $95,000/year
FCR (activation): $25,000/year
aFRR (capacity + energy): $45,000/year
Peak Shaving / Arbitration: $30,000/year
Total income: $195,000/year
Net profit: $195,000 - $26,000 = $169,000/year
Simple ROI: $545,000 / $169,000 = 3.2 years
IRR (10 years): 28-32%
The calculation is indicative. Actual income depends on auction results and frequency of activations. The forecast is based on the average prices of Ukrenergo for 2024-2025.
Revenue Stacking
The key advantage of BESS over other types of generation is the ability to combine different sources of income during the day. This is called revenue stacking. The system can simultaneously or sequentially provide FCR, aFRR, perform Peak Shaving and energy arbitration.
Typical revenue distribution for 1 MW BESS on the Ukrainian market:
Revenue Stack (Revenue Stack)
FCR is the main source. The highest margin, automatic mode.
aFRR is the second most important. Requires AGC connection.
Peak Shaving -- reduction of peak consumption of the network in the hours of the max tariff.
Arbitrage -- buying electricity at night, selling/using it during the peak.
Important: revenue stacking requires an intelligent management system (EMS -- Energy Management System), which optimizes the distribution of power between different services in real time. The controller must take into account the current SoC (State of Charge), the price forecast, obligations under auction contracts and the consumption schedule of the object.
SCADA and telemetry requirements
Ukrenergo's participation in the auxiliary services market imposes strict requirements on monitoring and management systems. Qualification is not possible without fulfilling these requirements.
Mandatory telemetry parameters
- Active power (P): measurement of with an accuracy of 0.5%, transmission every 1-4 seconds
- Reactive power (Q): measurement and transmission of at the same frequency
- Network frequency (f): measurement of with an accuracy of 10 mHz
- Voltage (U): all phases, accuracy class 0.5
- SoC (State of Charge): update every 10 seconds
- Equipment status: standby/emergency/maintenance
Technical requirements for the communication channel
- Protocol: IEC 60870-5-104 (basic) or IEC 61850 (prospective)
- Channel: dedicated line or VPN of reservation. The delay is no more than 500 ms
- Accessibility: 99.5% uptime, a backup communication channel is mandatory
- Cyber security: compliance with the requirements of the NCRECP regarding the protection of critical infrastructure. Channel encryption, firewall, event logging
- Industrial gateway: certified RTU (Remote Terminal Unit) of Ukrenergo protocol support
The cost of the SCADA + telemetry + communication complex for a typical 1 MW BESS is $25,000-40,000, including RTU, switching equipment, licenses and commissioning.
Technical requirements for equipment
Not every battery is suitable for RDP. The system must withstand constant charge/discharge micro-cycles (C-Rate up to 1C or 2C) and provide a quick transition between charge and discharge modes.
BESS Ukraine requirements for RDP projects:
- Inverter: Support for fast adjustment protocols (Droop control, P(f) characteristic). Deye HV, Sungrow, Huawei and Fluence PCS modules provide this. The response time of the inverter is less than 200 ms.
- Battery: LiFePO4 of resource 6,000+ cycles. LFP is ideal for FCR, as opposed to NMC, which degrades more quickly under constant micro-cycles. CATL, EVE Energy, BYD are recommended manufacturers.
- BMS: At least 2 levels of protection (cell-level + rack-level). Balancing of cells with an accuracy of 5 mV. CAN/Modbus support for EMS integration.
- Telemetry: It is mandatory to have an industrial gateway (RTU) for data transmission to the Ukrenergo dispatch center via a protected IEC 60870-5-104 channel.
- Fire safety: Aerosol or gas extinguishing (NOVEC 1230 or FM-200). Early detection system (off-gas detection) to prevent thermal runaway.
Legal path: From the idea to the first auction
The path from the idea to the first payment takes 6-12 months, depending on the complexity of the project and the region. We provide detailed step-by-step instructions.
Stage 1: Obtaining TU (1-2 months)
Submitting an application to the distribution system operator (Oblenergo) for technical connection. The required capacity, type of connection (on the HV or HV side), the project of the land plot. For systems over 1 MW - also agreement of Ukrenergo.
Stage 2: Design and permit documentation (1-2 months)
Development of project documentation by a licensed organization. Includes electrotechnical part, SCADA, fire safety, master plan. Expertise of the project. Obtaining a construction permit (for objects over 300 kW).
Stage 3: Supply and installation of BESS (2-3 months)
Ordering equipment (lead time for container BESS -- 8-12 weeks of China). Construction and assembly works. Chief assembly of the manufacturer. Commissioning works.
Stage 4: Licensing and qualification (2-3 months)
Obtaining a license from the NCRECP for the production of electric energy (or storage - if the relevant law is adopted). Passing qualification tests at Ukrenergo: confirmation of the system's ability to provide FCR/aFRR in accordance with the Transmission System Code. Includes test activations, reaction time checks, power measurements.
Stage 5: Registration on the auction platform and the first auction (2-4 weeks)
Registration as a provider of auxiliary services on the Ukrenergo platform. Submission of the first application for the auction. With successful completion - the first incomes 30-45 days after the auction.
Normative base: The Law of Ukraine "On the Electric Energy Market" (No. 2019-VIII), the Code of the Transmission System (Resolution of the NCRECP No. 309), Rules of the Auxiliary Services Market (Resolution of the NCRECP No. 2370). To participate in the market, you need a license from the NCRECP.
FAQ: Frequently asked questions about the ancillary services market
What is the minimum capacity of BESS to participate in RDP?
Formally, the minimum lot at the FCR auction is 1 MW. However, there is an aggregation mechanism that allows you to combine smaller systems (for example, 5 systems of 200 kW each) through one aggregator. As of 2025, aggregators are just beginning to appear in Ukraine, so in practice the recommended minimum capacity is 1 MW.
Is it possible to combine participation in RDP with other business models?
Yes, this is the basis of revenue stacking. A typical strategy: 60-70% of the time the system provides FCR/aFRR (receiving capacity payment even without activation), and the rest of the time performs Peak Shaving or arbitrage. The main limitation is that the SoC must remain in the operating range (usually 20-80%) to fulfill obligations to Ukrenergo. The EMS controller automatically manages this balance.
What are the risks of participating in the ancillary services market?
The main risks are: (1) Regulatory - a change in the rules or price caps of the NCRECP may affect profitability. (2) Competitive -- increasing number of BESS lowers auction prices (as in Germany). (3) Technical - non-fulfillment of obligations due to equipment failure attracts fines of 150-200%. (4) Currency -- CAPEX in dollars, revenues in hryvnias. Mitigation: income diversification through revenue stacking, use of Tier-1 equipment with a guarantee, currency risk hedging.
How long does qualification at Ukrenergo take?
The prequalification process for FCR/aFRR usually takes 4-8 weeks after application. It includes: submission of technical documentation, approval of the test program, test activations (at least 3 successful tests for each product), and final confirmation from Ukrenergo. We recommend laying down 2-3 months of taking into account possible delays.
Do RDP projects work with project finance?
Yes, and this is one of the most attractive aspects for investors. BESS for RDP has a predictable cash flow (capacity payments), which allows structuring project financing. International banks (EBRD, IFC) and Ukrainian banks are beginning to consider BESS as an asset class. Typical structure: 30% equity + 70% debt, loan term 7-10 years, DSCR coverage 1.3-1.5x. With an IRR of 28-32% and a stable cash flow, the project is attractive to creditors.
What is DP (Ancillary Services)?
The transmission system operator (NEC Ukrenergo) purchases balancing services at special auctions. These services are necessary to maintain a stable frequency of 50 Hz in the unified energy system of Ukraine. For BESS, this is the most profitable market, providing an ROI of 28-32% and a payback of 2.5-3.5 years.
Ukraine is at the initial stage of development of the auxiliary services market with the participation of BESS. This means that early entrants will get top prices (as was the case in the UK in 2017-2019 and Germany in 2018-2020). The window of opportunity is the next 3-5 years, until competition reduces margins.
Total Investment in the RDP?
Order a detailed feasibility study with a 5-year profitability forecast.