Opportunity Cost Quantification for Ancillary Services Provided by Heating, Ventilating, and Air-Conditioning Systems

In ancillary service electricity markets, opportunity costs account for the profit forgone by a generator due to the use of generating capacity for ancillary service provision instead of energy sales. They are calculated for each generator providing ancillary services and are included in the determination of market-clearing prices by market operators throughout the U.S. Recent interest in the use of smart heating, ventilating, and air-conditioning systems for ancillary service provision prompts an investigation into their associated opportunity costs. This paper proposes a definition for these costs and method of accounting for them through time. This is done by recognizing the impacts intra-hour consumption modification associated with ancillary service provision have on daily energy efficiency and costs. A numeric example is presented to demonstrate the method. It is found that marginal ancillary service opportunity costs vary over time and that properly adjusting energy consumption at an hour of interest can reduce the total opportunity cost of providing ancillary services.