Evaluation of Flexibility Markets for Retailer–DSO–TSO Coordination

The rise of distributed energy resources (DERs) can enhance the efficiency of system operations by providing flexibility services to the different agents involved, but they also pose a major resource allocation problem. This study considers three different agents procuring DER services: distribution system operators (DSOs) for local congestion management, transmission system operators (TSOs) for system-wide reserve deployment, and retailers for hedging against network usage tariffs based upon peak-load pricing. A variety of market mechanisms are identified to co-ordinate these needs, and three schemes are developed in detail. These are separate markets for each agent, co-ordinated Shapley value allocations for TSO and DSO, and a co-ordinated mechanism including retailers. These designs are evaluated on a realistic distribution network in Britain for two operational days. The results show a more efficient dispatch from the TSO–DSO co-ordinated procurement over independent sequential procurements. However, the inclusion of retailers in the joint dispatch is surprisingly less attractive due to the lack of improvement in social welfare and the undesirable impacts on the DSO.