The Economics of Demand-side Flexibility in Distribution Grids

Abstract

To avoid unnecessary distribution network investments, distribution tariffs are expected to become more cost-reflective, and DSOs are expected to procure flexibility. This will provide an implicit and an explicit incentive to provide demand-side flexibility. In this paper, we develop a long-term bi-level equilibrium model. In the upper level, the DSO optimizes social welfare by deciding the level of investment in the distribution network and/or curtailing consumers. The regulated DSO also sets a network tariff to recover the network and flexibility costs. In the lower level, the consumers, active and passive, maximize their own welfare. We find that implicit and explicit incentives for demand-side flexibility are complementary regulatory tools, but there are limits. If network tariffs are too imperfect, the resulting consumption profiles can become too expensive to fix with curtailment. We also find that it is difficult to set an appropriate level of compensation because of the reaction by prosumers.

A Bilevel Model for Voluntary Demand-Side Flexibility in Distribution Grids

“…A notice of one-day ahead is translated into a VoLL reduction of about 50% for residential consumers and to a lesser extent for non-residential consumers (ACER, 2018). The im-pact of the different level of VoLL have been analyzed in the context of mandatory curtailment in Nouicer et al (2021).…”

“…These studies have highlighted the importance of costreflective distribution tariffs to align consumers' interest with the system needs ( (Schittekatte et al, 2018), (Govaerts et al, 2021), (Schittekatte and Meeus, 2020), (Pediaditis et al, 2021), and (Hoarau and Perez, 2019)). The model we developed in our previous paper, Nouicer et al (2021), was the first to include the option for the DSO to curtail demand for a fixed compensation in a bilevel set-up. In that paper, we illustrated how demand-side flexibility and network tariffs could be complementary tools to save unnecessary network investments.…”

Optimized Operation of Distributed Energy Resources: The Opportunities of Value Stacking for Power-to-Gas Aggregated With PV

“…With the operational approach following the market sequences, thus selling as much as possible on the DAM and using the IDM then only subsequently for adjustments in case of improved prices or updated generation forecasts, DAM interactions clearly dominate the energy market interactions with an overall share of roughly 75% of imports and exports. 4 Fig. 7 reports the resulting annual energy flows of such price-sensitive operation.…”

Demand flexibility modelling for long term optimal distribution grid planning

“…Utilisation of demand response to balance for wind power generation uncertainty is analysed in [15] utilising a simplified demand response model based on assumed demand response bids. Noucier et al analyze the effects of implicit and explicit incentives on distribution system investments utilising a bi-level optimisation model [16], whereas [17] uses a two-stage optimisation model for optimal investment sizing, utilising Benders decomposition. Grid expansion models including implicit (price-dependent) demand response programs and investments to enable load shifting are proposed in [18] and [19], respectively.…”

“…Although a variety of demand flexibility models exist for long-term planning and for operational studies, the methodologies presented in the literature are often limited to load reduction (curtailment) [15,16] or rely on given ranges for up and downward flexibility provision [12,14,[17][18][19] and load recovery times [14,19] for tractable formulation of the optimisation problem. However, the effects of generalisation and parametrisation of such models on the accuracy have not been discussed sufficiently in the literature, which is the aim of this article.…”