The DFR’s benefits are not limited to solely providing ancillary services for solving grid challenges. The flexible capacity offered to the LFM can also be a more efficient and sustainable alternative to cover the changing demand than today’s balancing market. For this purpose, OPF modeling can be used with the objective function to optimize production based on DFRs and regular commercial production units. Such a strategy would find an optimal generation dispatch, covering the demand to a much higher degree due to its closer to the real-time operation than day-ahead market. A significant drawback of this approach is that it reduces the available flexible capacity to solve potential grid situations like voltage and congestion problems. This concern creates the need to obtain a proper balance between the amount of capacity used for different purposes.
3 Flexibility Market Operation and Coordination
DFR as an energy resource commodity differs from more common energy resources like large hydropower plants, wind farms, gas-fired power plants in the power system. This difference stems from location, capac-ity, and regulation. Due to these properties and how power markets operate today, DFR services are not well adjusted for such markets. Thus, a need for a new market arises that can satisfy these properties and facilitate DFR’s procurement and efficient utilization. Establishing this market will also lead to new roles and responsibilities coming into place, which will reinforce its proper operation.
The complete market strategy will determine the procedure for flexibility planning and procurement, as discussed later in this chapter. The division of roles and responsibilities between market participants and overall coordination will depend on the chosen market model. SmartNet [18] has suggested five market models which can bolster the market’s operation and coordination. Out of these models, the local market design has appeared to be the most fitting choice for this thesis. This design will thus be adopted and further customized to suit the purpose of the LFM strategy. With this market model, TSO and DSO will have access to a new market platform with a localized aggregation of flexible resources. In this market, DSO will have priority when it comes to the reservation of flexible capacity. The remaining resources will be made available to a centralized market platform, where TSO may procure them for their use. For this market to operate securely, it is essential to confirm that flexibility activation will not harm the operation of either transmission or distribution grid.
Figure 4: Visualisation of coordination between different market participants in a local ancillary service market model [18].
3.1 Roles and Responsibilities for Flexibility Market Participants
Both a distribution grid and a market platform require dedicated roles and responsibilities for different market participants. The definition of a LFMP is an operator in a given distribution system who serves a specific role in performing services or tasks regarding the power system’s operation [3]. Figure 5 presents an illustration of the different LFMP and their basic responsibilities in an LFM.
Figure 5: Coordination between different LFMP in a LFM.
3.1.1 Balance Responsible Parties
The two primary purchasers in this market will be the DSO and TSO, who aim to balance their system, hence giving them the role of Balancing Responsible Parties (BRP). BRP defines an entity that strives to balance or help the power system to be balanced [19]. The identification and exploration of background material for TSO and DSO are founded on the preliminary work in [3]. Thus, to some extent, that material will be directly used in this chapter.
Distribution System Operator (DSO)
European Distribution System Operators [20], define DSO as the operating manager of an energy dis-tribution grid, which normally ranges from low to medium voltage levels. As of today, DSO deals with responsibilities that are necessary for distribution grid operation [21], which includes:
• Connection and disconnection of DERs.
• Planning, maintenance, and management of networks.
• Management of supply outage.
• Sorting out energy billings.
Further proliferation of DERs, presents the DSO with new grid challenges which require novel solutions.
Emerging roles will lead to more active distribution grid management, requiring better communication with TSO and the Local Flexibility Market Operator (LFMO). Active management means that DSO will be more responsible for balancing their distribution grid. This balancing, according to [21], will consist of solving different grid situations like:
• Peak load management through DERs.
• Network congestion management.
• Provide reactive and active power support to TSO.
• Procure voltage support.
• Technical validation for power market.
• Perform forecasting of load scenarios.
• Conduct OPF simulation for scenario generation.
This active management of the distribution grid brings both advantages and challenges. The main benefit is the possibility of solving distribution grid problems more independently and efficiently. A challenge ac-companied by this benefit is how to perform this management. Valuable tools for DSO in solving this issue will be load scenario forecasting and OPF simulations, which will help determine potential grid problems.
This will involve DSO integrating more advanced control systems for monitoring the grid and performing the necessary measures. In addition to controlling the system, communication technologies for information exchange between all market participants will secure their proper cooperation [22].
Transmission System Operator (TSO)
The transmission system operator’s (TSO) main task in the power system is to ensure the security of sup-ply. Tasks that correspond with the security of supply include system balancing, solving congestion in the transmission grid, and ensuring that all grid regions have sufficient power. TSO can do so by having the tools and authority to perform frequency regulation and voltage control in their respective grid structures [23], [24].
The introduction of LFM allows for increased possibilities and enables DSO to control their grid and the available energy resources to a higher degree. For the proposed LFM in this master thesis, the balancing of the distribution grid is delegated to the DSO. Consequently, TSO will have to let go of some balancing authority while maintaining their duties regarding the transmission grid and the system as a whole. For the transmission system’s balancing, the present flexibility in the new LFM may be acquired by the TSO.
This will require them to compete in this market in order to procure the needed capacity. The advantage of a new LFM is that it brings more possibilities for TSO to solve balancing problems in the transmission grid, such as:
• Reduced interconnection power flow between distribution grid and transmission grid (congestion
man-• DFR use as an alternative for solving power shortage or power excess (frequency balancing).
• TSO usage of DFRs from distribution grid to reduce the power injection to certain distribution grid to configure power flow and solve line congestion, instead of only utilizing generation rescheduling from larger power plants [25].
Coordination between TSO and DSO
With more duties falling on the DSO, communication and standardized operation scheme between DSO and TSO will be essential to facilitate the success of this transition. The LFM is the attempt to solve these two challenges. These measures can be realized with the development of a platform with standard rules for interaction and communication. The details of how this market platform works will be further explained later in chapter 3.2.1.
3.1.2 Aggregator’s Role in the Power Market
An aggregator is a relatively new entity in the power market, and therefore no single definition has yet been established. For this thesis, an aggregator is a market participant in the power system that operates as an intermediary between end-users, small DER owners, and power system participants [26]. With this definition, the aggregator links the DFR’s capacity provided by prosumers and consumers to the power market. As explored in the projects [3], and [27], aggregator’s main responsibilities will correspond to:
• Establishing contracts with prosumer and consumers regarding usage and mapping of DFRs.
• Forecasting production and capacity each DFR will have for a given day.
• Sending in bids and offers based on the use and available capacity for each DFR.
• Ensure proper activation of DFRs according to the operation plan acquired from the LFM.
• Collaborate with DSO and LFM to acquire proper activation signal and to facilitate settlement process.
• Perform settlement process with prosumers and consumers for utilization of their DFRs.
The identity of an aggregator is still up for discussion. Their role may be covered by an already existing actor or a whole new entity in the power market. The determining factor in this issue will be their ability to cover all responsibilities mentioned in the list above.
3.1.3 Local Flexibility Market Operator
The LFMO will have a central role when it comes to the process of coordinating the market operation. Their main tasks will consist of coordinating and performing the operation of the LFM [28]. These necessary tasks consist of:
• Gathering market bids.
• Performing market-clearing functions.
• Communicating market results.
• Performing settlement process.
• Submitting activation bids from aggregators and grid operators.
• Exchanging information regarding services between market participants.
From previous projects and papers like [18] and [29], the entity that takes the role as LFMO is often correlated with LFM model. Alternative for LFMO range from DSO, DSO and TSO collaborating, and an independent entity. Each of these alternatives has advantages and disadvantages when it comes to acting as LFMO as described in [18]. Again, it comes down to what services the platform provides and the utilized LFM model.