Bi-level optimization model for the coordination between transmission and distribution systems interacting with local energy markets

Abstract The coordination between distribution system and transmission system operation in the presence of distributed energy resources (DERs) is a new framework that needs appropriate modeling. Moreover, local energy market models are emerging, and there is the need to describe the decision-making occurring in active distribution systems including the distribution company (Disco) and the DER aggregators. This paper investigates the coordination between transmission, distribution, and DER aggregators that interact in a local market model. The individual objectives of the decision-makers are conflicting with each other. For this purpose, a bi-level optimization approach is proposed, in which the operation problem of the Disco and the day-ahead market clearing managed by the wholesale market operator are considered as the upper- and lower-levels problems, respectively. Moreover, to model the uncertainties of output power of renewable energy sources in the Disco’s problem, the information gap decision theory is used. The resulting model is a non-linear bi-level problem, which is transformed into a linear single-level one through the exploitation of the Karush-Kuhn-Tucker conditions and the duality theory. To investigate the effectiveness of the model, two case studies are defined in which the IEEE 33-bus and a real 43-bus distribution systems are connected to the RTS 24-bus power system.