Optimal procurement of flexibility services within electricity distribution networks

Laur, A, Nieto-Martin, J, Bunn, D W and Vicente-Pastor, A (2020) Optimal procurement of flexibility services within electricity distribution networks. European Journal of Operational Research, 285 (1). pp. 34-47. ISSN 0377-2217

Abstract

The increased injection of volatile renewable energy at local levels into the electricity grid is forcing the distribution network operators to seek participation in emerging service markets in order to obtain the flexibility required to balance their systems. However, the distribution companies lack experience in designing new market arrangements. We consider a market framework wherein a proactive distribution company is willing to purchase reserve capacity for overload management, using a two-part tariff. The problem is modelled as a three-stage stochastic market including Day-Ahead, Intra-Day and Real-Time, with uncertainty on both demand and generation. After assessing our formulation, we discuss the impact of risk-aversion at each stage with an objective function based on CVaR. Finally, different Intra-Day clearing horizons and delivery settings are evaluated. The results show that risk-aversion close to Real-Time becomes the main driver for decision makers and that early hedging strategies lead to sub-optimal solutions.