Europe to lead global $16 billion global ancillary services market


The need to accelerate the penetration of distributed renewable energy is expected to drive global economies into adopting regulations to promote ancillary services, according to a new report issued by Transparency Market Research.

The report suggests that the global market for ancillary services will grow by 8% between 2020 and 2030.

In terms of revenue, the market is expected to record an increase from $7 billion to $16 billion during the forecast period.

Europe is expected to dominate the market whilst Asia Pacific will rise at promising pace on back of governments’ efforts to adopt renewables in overall energy mix.

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New regulations have come to the forefront in the wake of COVID-19, which will shape the outlook of ancillary services for the power market.

For instance, India has seen a shift from long-term stakeholder engagement to short-term contracts to overcome problems in energy trade demarcations in real-time electricity markets. This has made ancillary services gain traction in the power market.

Global electrification is also expected to continue to expand the market. Countries in Asia Pacific and low and middle-income economies in Africa have witnessed a rapid rise in access to electricity over the past five years, driving the demand for ancillary services in the power market.

Grid modernisation is also expected to drive the market. Streamlining the processes in power bidding and deployment of smart meters will reduce uncertainty in distributed energy resources.

Advancements in internet connectivity in ancillary services platforms will also help grid operators and service providers tap lucrative opportunities.

The operating reserve segment led the market in 2019 whilst grid modernisation of the distribution grid put North America in the lead of the US market.

The presence of a relatively large number of players both at regional and global levels has raised the ante for new entrants and incumbents in the ancillary services for power market. Not only is the landscape intensely competitive, but there also exists a high degree of fragmentation.

Other key challenges within the market include the ongoing COVID-19 pandemic which has spurred stakeholders in the electricity market to follow power trading and adopt an hourly demarcation in the ancillary services for power market. This has created unique uncertainties in energy trade demarcations for distribution companies.