Distributed Energy Resources

Small market changes, giant leaps for DERs

The SmartNet team is developing the mathematical models that will serve as the bricks of enhanced market architectures to enable the efficient utilization of DERs.

Unlike conventional power generating units, Distributed Energy Resources (DERs) offer a much more diverse range of power sources with intricate physical and economic drivers. In fact, we may have DERs whose power production is fundamentally contingent on exogenous factors that are not fully predictable or uncontrollable, such as weather conditions (wind turbines, PV panels); driving habits and needs (EVs); subjective comfort (heat, ventilation and air conditioning systems); and even DERs whose primary energy service is not necessarily “power”, as in the case of combined heat-and-power units. This new reality, however, conflicts with the current design of TSO real-time markets. Indeed, TSO real-time markets were, back in the days, designed and tailored for a power system comprising almost exclusively a limited variety of controllable and dispatchable power generating units, the majority of which, besides, were located at the transmission grid. Consequently, these TSO real-time markets now fail to efficiently accommodate the potentially more dynamic and less controllable behavior of DERs.

Against this background, one of the main goals of the SmartNet project is first to identify which changes to current TSO real-time markets may serve to facilitate the integration and effective utilization of DERs, and then to revise current TSO and DSO operational tools, and equip them with new ones if needed, to implement those changes. The team behind SmartNet is, therefore, focusing on developing new mathematical models that may serve as the basis of such revised market architecture. This constitutes a Herculean challenge that does not only call for bringing together and leveraging the most recent advances and findings in the fields of mathematical programming, energy economics, and power system engineering, but that also, and above all, requires overcoming the huge resistance to change and structural obstacles to innovation that has traditionally characterized the power sector. Faced with this reality, the SmartNet team is placing particular emphasis on pinpointing those changes to existing TSO real-time markets that, while not entailing a substantial departure from current practices, may significantly help DERs partake in TSO real-time markets and, thus, increasing the performance of the power network.

As of today, we have identified three major areas where small changes to existing market procedures may considerably lead to great progress in the integration of DERs, namely:

  1. The effective utilization of DERs will require a more careful management of distribution grids. As compared to the transmission system, distribution networks typically feature a radial configuration, where, in addition, the electrical resistance of feeders is no longer negligible compared to their reactance. Consequently, operating actively distribution grids will call for revised market tools able to capture, as accurately as possible, the strong interactions of voltage, active and reactive power magnitudes that determine the state of the distribution grid. To this aim, the SmartNet team is currently enriching current market-clearing algorithms with computationally efficient, albeit possibly approximate, distribution grid models. In fact, by means of these models, and in combination with a consistent system for pricing electricity at the node level, the flexibility services provided by DERs can be leveraged optimally and fairly valued.
  2. In order to account for the dynamics and the partly unpredictable behavior of some DERs, markets must be able to react to the varying system conditions more quickly, closer to real time and with some degree of anticipation on the plausible evolution of the power system state variables. Furthermore, markets must allow for and be able to accommodate the different responses to price that different DERs may exhibit in terms of reaction times, power profile, etc. In this regard, the SmartNet team is producing mathematical models to assess how market-architecture specifications such as clearing frequency, look-ahead market horizon, time granularity, etc. impact the efficient utilization of DERs. In parallel, we are developing new market products (also referred to as “smart orders” or “complex bids”) for market participants and, in particular, for DERs to accurately express their dynamic price-response behavior in the ancillary-service market.
  3. In order to make it easier for DERs to profit from the previously mentioned market products, SmartNet advocates for the market participation of aggregation or clusters of DERs. Accordingly, the SmartNet team is also building mathematical models and tools to foster and reap the benefits of these aggregations.

At the time this letter is being written, the SmartNet consortium has already developed a mathematical model for the nearly real-time management of transmission and distribution-grid congestion and power balancing. The model describes a market that is cleared every five minutes, with a look-ahead horizon of one hour, and a time resolution of one minute for the first 5-min time slot of the market. The market is, furthermore, run using a rolling-window implementation approach that is able to profit from updated system information as we come closer to the point in time when the ancillary service should be actually provided. The market allows for a number of different complex bids ranging from the basic energy-price bidding curves to the more sophisticated deferrable and exclusive bids. This market architecture will be compared with alternative market designs that, albeit not so ambitious, may encounter less resistance on its way to its actual implementation in the midterm (2030).

In the upcoming days, we launching a web consultation on these issues among the academic and industrial stakeholders, most of which comprise the International Advisory Board of SmartNet.

All in all, we believe that advances in the three areas mentioned above (distribution network modeling, market design, and DERs aggregation), even if small, may constitute big steps forward in achieving the society’s ambitious vision of transforming current power systems into super grids of smart grids.