A framework for electricity distribution-level coordination through local flexibility mechanisms

Abstract

An approach to incentivize customers to efficiently utilize existing electricity distribution networks is through dynamic network pricing. However, unintended customer responses may be obtained requiring distribution-level coordination. This paper proposes Local Flexibility Mechanisms (LFMs) that accompany efficient distribution network charges. Through market-based approaches, LFMs aim to unlock flexibility in the distribution level by incentivizing customers to reveal their preferences and willingness to pay in order to reach optimal operational and investment decisions that increase the economic efficiency of the whole system. LFMs are designed to complement already proposed distribution network charges that consist of two components: a peak coincidence network charge (PCNC) and a fixed charge. Two LFMs are proposed: short- and long- term. First, to reduce the uncertainty of peak hours and avoid the creation of new unexpected peak hours, a short-term LFM operates through dynamic auctions. Simultaneous Ascending Auction (SAA) and Simultaneous Ascending Clock Auctions (SACA) are the two proposed schemes that work as a tool to retrieve information regarding future network usage. The auctions are held to allocate network capacity during potentially network scarce situations. Second, to avoid customer under- or over-investment in Distributed Energy Resources (DERs) and to promote efficient DER network integration, a long-term LFM operates through a Request for Proposals (RFP). RFP is issued when existing flexibility is insufficient, and investments in additional flexibility are required. It aims to coordinate and incorporate DER investments in the long-term distribution planning.