Ancillary Services Power Market to Reach USD 55 Billion By 2035 | NextEra Energy, Xcel Energy, FirstEnergy
May 22, 2025
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Introduction
As per MRFR analysis, the Ancillary Services Power Market Size was estimated at 32.53 (USD Billion) in 2023. The Ancillary Services Power Market Industry is expected to grow from 33.99 (USD Billion) in 2024 to 55 (USD Billion) by 2035. The Ancillary Services Power Market CAGR (growth rate) is expected to be around 4.48% during the forecast period (2025 - 2035).
The ancillary services power market plays a critical yet often underappreciated role in ensuring the reliability and stability of modern electricity grids. As the energy landscape transitions toward decentralized, renewable, and intermittent sources of power generation such as wind and solar, the importance of ancillary services has become increasingly evident. These services support the transmission of electricity from generators to consumers while maintaining the balance and quality of power across the grid. With energy systems around the world undergoing rapid transformation, the ancillary services market is evolving in scope, structure, and significance.
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Understanding Ancillary Services
Ancillary services refer to a wide array of functions necessary to maintain grid stability, power quality, and reliability. These include frequency regulation, voltage control, spinning and non-spinning reserves, black start capabilities, and reactive power support. Unlike base-load electricity generation, which delivers large volumes of power continuously, ancillary services are more dynamic and responsive. They are designed to react to real-time changes in power demand and supply, helping to maintain the delicate balance between them.
Frequency regulation ensures that the power system operates at a constant frequency (typically 50 or 60 Hz), while voltage control maintains power quality within acceptable limits. Spinning reserves are backup power sources that can ramp up quickly in the event of a sudden shortfall in supply. Black start services enable the restoration of power without relying on external energy sources after a system-wide blackout. Each of these services is indispensable to the uninterrupted operation of the grid.
Market Drivers and Trends
The global shift toward renewable energy is one of the primary drivers of the ancillary services market. Renewable power sources, while environmentally beneficial, introduce volatility due to their dependence on weather conditions. Solar and wind farms can experience rapid output fluctuations, which in turn increase the need for fast-responding ancillary services to maintain grid reliability.
Another major driver is the proliferation of distributed energy resources (DERs), such as rooftop solar, battery energy storage systems, and electric vehicles. These decentralized assets are increasingly being aggregated and integrated into virtual power plants (VPPs), which can participate in ancillary service markets. Grid operators are leveraging advanced technologies like AI, IoT, and real-time analytics to forecast demand more accurately and dispatch ancillary services efficiently.
Furthermore, regulatory reforms in electricity markets across Europe, North America, and Asia are enabling broader participation in ancillary services by non-traditional providers. In many regions, independent power producers, aggregators, and even residential consumers can now provide these services, promoting market competition and innovation.
Role of Battery Energy Storage
Battery energy storage systems (BESS) have emerged as key enablers of ancillary services, particularly frequency regulation and spinning reserve. Unlike traditional power plants, batteries can respond within milliseconds to grid imbalances. They are ideally suited for short-duration, high-response applications and are increasingly being deployed as part of grid modernization initiatives.
Advanced battery technologies, including lithium-ion, flow batteries, and emerging solid-state solutions, are being integrated into grid infrastructure to support fast frequency response, ramping services, and peak shaving. As costs continue to decline and performance improves, batteries are expected to dominate several segments of the ancillary services market.
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Regional Insights
The ancillary services market exhibits significant regional variations based on regulatory frameworks, grid infrastructure, and renewable energy penetration. In the United States, markets such as PJM, CAISO, and ERCOT have well-established ancillary service structures that include competitive bidding and market-based pricing. Europe, led by countries like Germany and the UK, is pioneering new market models that incorporate distributed assets and support cross-border balancing services through initiatives like ENTSO-E.
In Asia, countries such as China, Japan, and Australia are rapidly upgrading their grid systems to accommodate renewable energy and improve ancillary service capabilities. Australia’s National Electricity Market (NEM), for instance, has become a model for integrating battery storage into ancillary service markets. Meanwhile, emerging economies are beginning to develop frameworks for ancillary services as they expand and modernize their power sectors.
Challenges and Future Outlook
Despite growing recognition of their importance, ancillary service markets face several challenges. Chief among them is the lack of standardized definitions and valuation methods across regions. This inconsistency complicates the participation of multinational energy providers and technology vendors. Additionally, legacy grid infrastructure in some areas limits the ability to integrate modern ancillary services, particularly those based on digital technologies and DERs.
Market design and regulatory evolution are crucial to unlocking the full potential of ancillary services. Policymakers must create fair, transparent, and technology-neutral platforms that encourage participation from a diverse range of service providers. Investment in digital infrastructure, real-time monitoring systems, and advanced forecasting tools will further enhance the effectiveness of ancillary services.
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Looking ahead, the ancillary services market is expected to grow robustly, driven by grid decarbonization, digital transformation, and decentralized energy models. As energy systems become more complex, ancillary services will serve as the invisible hand that keeps the grid balanced, efficient, and resilient.
The ancillary services power market is an essential component of a reliable and secure electricity grid. As the world pivots toward sustainable energy and smarter grids, the importance of these services will only increase. Stakeholders across the energy ecosystem—including utilities, regulators, investors, and consumers—must collaborate to ensure that ancillary services continue to evolve in line with the demands of the modern power system. With the right policy support and technological innovation, ancillary services can pave the way for a more flexible, reliable, and sustainable energy future.
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