Optimal Management of Distribution-Connected Assets Operating under Carbon and Energy Day-Ahead Markets

The worldwide attempts to reduce greenhouse gas emissions affect the way power systems operate, as the system operators must avoid dispatching cheap but carbon-intense sources. Many authors have proposed optimization models in which the assets are considered to be owned and controlled by a single entity. Although this kind of approach guarantees the minimum operational costs, it does not model the characteristics of the modern deregulated markets in which electricity and carbon credits can be traded. In this paper, we propose a bilevel formulation to address the distinct objectives of market agents, namely the distribution and transmission system operators. These agents trade carbon credits and electricity in two different market environments. The formulation was tested for a 14-node transmission system and a 34-node distribution system in which dispatchable generators, demand response and storage systems devices are installed. Numerical results attest to the efficiency of the proposed model in partitioning the revenue among the market agents. Furthermore, the existence of these market environments may benefit both stakeholders.