Refinement of Reliability Grid Codes in the Provision of Ancillary Services

Abstract: Stochastic resources such as wind farms, electric vehicle aggregators, and demand-side assets are increasingly participating as reserve providers in ancillary service markets. To manage delivery uncertainty, system operators impose minimum reliability thresholds on such providers. Energinet, the Danish transmission system operator (TSO), has pioneered this approach through the P90 requirement, requiring stochastic providers to make accepted reserve capacity bids available with at least 90% probability. Yet this threshold is set by regulatory convention, not optimization: no existing framework treats it as a design variable or characterizes the cost-reliability trade-off it governs. This paper closes that gap. We develop a bilevel optimization framework in which the TSO in the upper level sets the reliability threshold endogenously while providers in the lower levels respond through reliability-constrained bidding, with chance constraints reformulated analytically using a Weibull tail distribution. Applied to the Nordic frequency containment reserve for disturbances (FCR-D) market, the cost-optimal threshold lies below P90 in the studied cases, with cost reductions by up to 14.5% relative to the fixed standard. Dynamic hourly thresholds yield a further reduction of up to 2.4%, suggesting efficiency gains may increase in larger and more diverse reserve markets.