Coordination of Local and Central Electricity Markets for Providing Balancing Services

A local electricity market (LEM) is defined as a marketplace that ensures power balance locally while respecting the security constraints of the distribution grid. Moreover, the LEM operator acts as a mediator for participation of flexibility resources located in the distribution grid to the central electricity market (CEM) by facilitating the communication to CEM. However, because these resources can be used both locally and system-wide, effective utilization of local resources in the system necessitates coordination between the LEM and CEM operators. In this work, these entities are considered to be the DSO and the TSO, respectively. Several coordination schemes have been considered, categorized as DSO leader, DSO follower and TSO-DSO iteration. In addition, a new coordination scheme is introduced, dubbed DSO leader-price sensitive. We simulate these schemes for a residential Dutch LV network hypothetically connected to the IEEE 14-bus system and compare them in terms of resulting system balancing costs. We show that the newly proposed scheme results in lower costs and higher activation of demand response from end-users.