## 2 Benefits Assessment of ESS Introduction in the F/R Market
### Assessment of Economic Benefits from ESS for F/R in the Electricity Market  
ESS is introduced in a power system for F/R. If implemented in the South Korean electricity market, it will change the overall demand placed on coal and LNG supply capacity generators and modify electricity costs. Figure 2: Schematic diagram of the SMP forecast methodology. Currently, coal generators need to secure a reserve for F/R through a 5% reduced operation in the electricity market. Although this generation constraint is not included in the price-setting schedule, it is used in the operation schedule that is produced following the creation of the price-setting schedule. Therefore, reduced coal capacities receive an opportunity cost payment known as a constrained-off energy payment (i.e., the aforementioned COFF), which is calculated based on the minimum SMP and coal fuel cost. To meet the shortfall, LNG generators increase generation and then receive compensation, known as a constrained-on energy payment (CON); CON is calculated based on the maximum SMP and LNG fuel cost. However, the settlement would differ when operating ESS for F/R: because F/R ESSs can alleviate the constraint, coal capacities can generate more, and be compensated for this increased generation in the form of a scheduled energy payment (SEP). This SEP is calculated based on the SMP in the price-setting schedule, rather than the COFF. Furthermore, the LNG generators need not generate more to compensate for the shortfall, and so they do not receive the CON payment. As a result, each participant (i.e., Coal Gen., LNG Gen., and Utility) would then be compensated as in Table 1.  
We propose a method by which to estimate the utility benefits (UBs) of introducing into electricity markets ESSs for F/R. We consider the benefits in the energy and ancillary service (A/S) markets, based on generation constraints and when considering F/R in the South Korean electricity market. Given that ESSs can be used as reserves, the implementation of an ESS alleviates the base load generation constraint and can produce benefits similar to ESS capacity; this is because the utility need not pay additional costs with respect to the coal and LNG generators. In addition, an A/S payment would be provided to the utility because the F/R ESS, which the utility needs to plan to own, replaces the conventional generation role. Therefore, the UBs increase in terms of the energy and A/S aspects. Equations for calculating the energy market price (EP) and the A/S price (ASP) benefits are as follows. \[\text{EP}=Avalability_{ESS}\times(CON+COFF-SEP)\times 8760\times R_{Power} \tag{7}\]  
where \(Avalability_{ESS}\) and \(R_{Power}\) are the coefficient of utilization for ESS and the generation operation rate, respectively, and  
\[\text{ASP}=Capacity_{ESS}\times Availability_{ESS}\times W_{ESS}\times W_{Droup} \times W_{Deadband}\times U_{FR}\times R_{ESS}\times 8760 \tag{8}\]  
where \(Capacity_{ESS}\), \(W_{ESS}\), \(W_{Droup}\), and \(W_{Deadband}\) are the practical ESS capacity, weighted values of ESS, droop, and dead band, respectively. Furthermore, \(U_{FR}\) is the unit cost for F/R, and \(R_{ESS}\) is the ESS operation rate. ESS compensation should be differentiated from conventional resource compensation, because it provides outstanding F/R performance; therefore, resource weighting was added through \(W_{ESS}\)--which has a value exceeding 1 in the ESS settlement of the A/S market--to provide a larger payment than conventional resources. Both the droop and dead band demonstrate the performance of resources in F/R, and thus, these factors should also be considered in the A/S settlement by using \(W_{Droup}\) and \(W_{Deadband}\). These have values in the range of 0.8-1.05 and 0.85-1.05, respectively, and resources with lower values in them are set so as to have heavy weighting. The sum of energy (EP) and A/S benefits (ASP) equals the UB, given by Equation (9). \[\text{UB}=\text{EP}+\text{ASP} \tag{9}\]