Pricing Mechanism for Flexible Loads Using Distribution Grid Hedging Rights

Sarmad Hanif, Philipp Creutzburg, H. B. Gooi, Thomas Hamacher

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

Abstract

This paper proposes a new pricing mechanism for the integration of flexible loads in distribution grids. This price is calculated from an envisioned two-layer local distribution grid market, where flexible load aggregators are price takers and the distribution system operator (DSO) is the market operator. On a day-ahead basis, the DSO runs the local market and clears distribution locational marginal prices (DLMPs). Aggregators purchase energy based on these DLMPs. However, depending upon grid conditions (losses/congestion), the DLMP value increases, causing aggregators to bear high energy procurement cost. To mitigate this issue, a second layer is introduced to compute ex-ante scenario-based Hedging Rights. Through a combination of these two layers, the proposed mechanism 1) improves market competition among the involved entities, 2) maintain the congestion alleviation property of DLMPs, and 3) incorporate the intertemporal energy requirements of flexible loads. The proposed framework is tested on an IEEE benchmark distribution grid. The simulation results show that the proposed pricing mechanism allows aggregators to achieve higher cost-savings, while preserving physical power flow evaluation feature of DLMP.

Original languageEnglish
Article number8424037
Pages (from-to)4048-4059
Number of pages12
JournalIEEE Transactions on Power Systems
Volume34
Issue number5
DOIs
StatePublished - Sep 2019

Keywords

  • Distribution locational marginal prices (DLMPs)
  • flexible loads
  • hedging rights (HRs)
  • revenue adequacy

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