Synergies between Distribution Use-of-System Tariffs and Local Flexibility Markets

Abstract

Managing flexibility is an important element of future distribution networks with more than one mechanisms aiming at this goal. Recently proposed methods include variable distribution use-of-system tariffs and flexibility markets. This paper proposes a model for designing variable tariffs under the presence of flexibility products, such as capacity limits offered by aggregators, and studies their synergies. A detailed model of the network power flows is considered and tariffs can have temporal granularity, while retaining simplicity and cost recovery for the system operator. The flexibility products' cost functions are calculated in detail. Case studies illustrate that flexibility products are preferable as a means of motivating flexibility as long as their are priced close to their actual value. As their pricing increases beyond that, tariffs become increasingly preferable.