Towards (close) harmony: options for enhanced TSO-DSO coordination

The SmartNet project is analyzing different possibilities for coordination schemes between TSOs and DSOs to enable the efficient integration of DRES and flexibility in power systems.

Power systems are undergoing significant changes because of the increasing penetration of distributed energy resources (DER), mainly connected at the distribution grid. This evolution results in higher needs for flexibility services from grid operators (TSO and DSO) and commercial market participants such as balancing responsible parties. This also leads to the so-called paradigm shift for the power system from purely “generation-follows-loads” to more and more “loads-follow-generation”. In addition, local effects have to be taken into account and a further decentralization of the energy system can be observed. This evolution opens increasing opportunities for (localized) flexibility solutions such as energy storage and demand response. In case of large deviations in e.g. wind and solar production, flexible demand and energy storage could be used in order to control and restore the frequency and the voltage of the grid, to balance individual portfolios of commercial market participants or to solve congestion.

In parallel to those technical evolution and challenges, energy markets and regulation are undergoing changes as well, witness the fact that the European Commission is currently reviewing the regulatory framework of the EU’s electricity markets. The European Commission envisions to launch a package of new legislative measures by the end of 2016, supported by public consultations and market studies, as well as research projects to underpin the upcoming redesign of the European electricity market.

The abovementioned evolution require increased interaction and cooperation between transmission system operators (TSOs) and distribution system operators (DSOs). In this perspective, the SmartNet projects is analyzing several options for enhanced TSO-DSO coordination in relation to ancillary services for the power system. In summary, five basic coordination schemes for TSOs and DSOs are currently analyzed. TSO-DSO coordination schemes will determine the operational processes and information exchange between the system operators in the context of the procurement, activation and settlement of different ancillary services (AS) procured by the TSO and local services, procured by the DSO.   The ongoing analysis of these coordination schemes incorporates an investigation of a set of roles (responsibilities) that can be taken up by TSOs, DSOs or other market players, as well as a possible market design, in line with these roles.

In what follows, the five basic TSO-DSO coordination schemes currently under investigation are presented and briefly discussed. DER can be understood as any resource that is distributed (connected to the distribution grid) and which could potentially offer ancillary services.

  1. Centralized AS market model

In this coordination scheme, the TSO contracts DER directly from DER owners connected to the distribution grid for AS purposes. There is one common market for AS, which is operated by the TSO for both resources connected to the transmission and distribution level. The DSO is not involved in the procurement and activation process and there is no separate local market, so DSOs are not procuring local flexibilities in or near real-time. The TSO is responsible for the operation of its own market for ancillary services. DSO constraints are not explicitly taken into account. A separate process should be installed to guarantee that the activation of resources from the distribution grid by the TSO does not cause additional constraints at the DSO-grid (e.g. congestion).


  1. Local AS market model

In this second coordination scheme, the TSO can contract DER indirectly. This happens after the DSO, via a local market, has aggregated these resources, and has transferred them to the TSO AS market. As a consequence, there is a separate local market managed by the DSO. Resources connected to the distribution grid can only be offered to the TSO via the local market managed by the DSO and after the DSO has selected resources needed to solve local congestion. The DSO clears the market, select the necessary bids for local use, and aggregates and transfers the remaining bids to the TSO AS market. The DSO thus assures that only bids respecting the DSO grid constraints can take part in the AS market. The TSO from his side is responsible for the operation of its own market for ancillary services, where both resources from the transmission grid as resources from the distribution grid (after aggregation and transfer by the DSO) can take part.


  1. Shared balancing responsibility model

Within this coordination scheme, the balancing responsibility related to a certain distribution area, is transferred from the TSO to the DSO, meaning that the DSO has to respect a pre-defined schedule and uses local DER (obtained via a local market) to comply with balancing responsibilities. The pre-defined schedule is based on the nominations of the BRPs, possibly in combination with historical forecasts at each HV/MV interconnection point. There is an AS market for resources connected to the transmission grid, managed by the TSO, while there is a separate local market for resources connected to the distribution grid, managed by the DSO. Resources from the distribution grid cannot be offered to the TSO AS market and DSO constraints are integrated in the market clearing process. Consequently, the DSO contracts local flexibility for both local congestion management and (local) balancing of its distribution grid. The TSO is the operator of the TSO AS market, limited to resources connected at the transmission level. The TSO is only responsible for the balancing of the transmission grid.


  1. Common TSO-DSO AS market model

This coordination scheme implies that TSOs and DSOs contract DER in a common flexibility market. The main goal is the minimization of total procurement costs of flexibilities contracted by TSO and DSO. One common market is organized for flexibilities for both TSO and DSO with both resources connected at transmission level and connected at distribution level. TSO and DSO are both responsible for the organization and operation of the market. Distribution (and transmission) grid constraints are integrated in the market clearing process. The TSO and DSOs are jointly responsible for the market operation of the common TSO-DSO market. The TSO is contracting AS services from both transmission and distribution while the DSO envisions AS services from distribution grid in cooperation and interaction with the TSO.


  1. Integrated flexibility market model

In this final, integrated coordination scheme, TSOs, DSOs and commercial market parties (CMPs) contract DER in a common flexibility market. TSOs and DSOs can both buy flexibility or sell previously contracted DER to the other market participants. This common market for flexibilities is organized according to a number of discrete auctions and is operated by an independent/neutral market operator. There is no priority for TSO, DSO or CMP. Resources are allocated to the party with the highest willingness to pay. There is no separate local market but DSO constraints are integrated in the market clearing process. TSOs are supposed to contract AS services in this common market while DSOs are supposed to contract DER for local purposes in the same common market.

A web consultation is being launched on these coordination schemes among the academic and industrial stakeholders to gather feedback from the community on the ongoing analysis.

The outcome of the SmartNet TSO-DSO coordination scheme analysis will shed a light on the options for efficient TSO-DSO cooperation in the future. In addition, the results will provide concerned stakeholders, policy makers and the community in general with insights in the possible consequences (advantages and disadvantages) of the different TSO-DSO coordination options with respect to the roles and the market design for power systems of the future.