Cost Optimal Integration of Flexible Buildings in Congested Distribution Grids

Buildings are candidates for providing flexible demand due to their high consumption and inherent thermal inertia. In the future, flexible demand side reserves may also help to relax the expected higher reserve requirements of the grid due to the presence of renewables. However, this flexible demand might be vulnerable to price signals, as the simultaneous increase in consumption by multiple buildings due to low (high) energy (reserves) price periods might cause congestion in distribution grids. In order to integrate congestion-free energy and reserve provision from buildings, this paper presents two benchmark pricing methodologies: (1 ) distribution locational marginal prices (DLMP), and (2) iterative DLMP (iDLMP). Both methods deploy convex optimization to obtain an optimal solution of the original problem. Using dual decomposition, a settlement scheme, which efficiently distributes the congestion cost among involved participants, is also presented. Case studies are performed on a benchmark distribution system along with the National Energy Market Singapore's price framework. The results prove that both methods optimally remove congestion from distribution grids and have potential to be integrated into the theoretical framework of liberalized markets. Furthermore, as a comparison, it is shown that the DLMP-based prices outperforms existing pricing structures of the distribution grid. Hence, using this scheme, the distribution system operator can evaluate existing tariffs and introduce incentives for price responsive demands. However, to support these methods, the high requirement for information sharing in the DLMP method and/or communication technology infrastructure for calculating iDLMPs must exist in the future grid.