  This paper studies the procurement and pricing of inertial response using a
frequency-constrained unit commitment formulation, which co-optimizes the
provision of energy and inertia services while accounting for their
complementary properties. The proposed approach builds on a two-step process
that allows to differentiate between the units being online for energy purposes
and the ones committed additionally solely for inertia provision. Subsequently,
three novel pricing and payment schemes that reimburse inertia providers in a
transparent and fair manner according to their individual participation are
proposed. The analysis considers both synchronous and converter-based
generators and provides insights regarding the impact of each pricing scheme on
total system cost, as well as on the investment signals for technologies
capable of offering affordable inertial response. The results show that all
three methods will have a beneficial impact on frequency stability and aid the
operator in ensuring system reliability, whereas the policy implications to
different inertia providing units will vary between the payment schemes.
