Proactive demand-side participation: Centralized versus transactive demand-Supply coordination

The active participation of demand-side flexible resources in the wholesale market price formation and load dispatch process is crucial to encouraging demand-side participation. This calls for a joint supply-demand coordination mechanism to fully take advantage of the flexible resources in distribution systems, including distributed energy resources (DERs) and responsive loads (RLs). This paper aims at comparing and evaluating the centralized and transactive distribution-level market coordination mechanisms. We introduce the centralized and transactive demand-supply coordination mechanisms for the distribution-level market and elaborate on the structural difference between the two frameworks. Relevant metrics and test scenarios are proposed for a meaningful comparison. The key observations of the comparative study are generalized from the perspective of different entities in the market: fixed loads, flexible loads, DERs, and conventional generators. It is observed that while the centralized approach leads to socially optimum solutions, the transactive approach by allowing for competitive bidding at the distribution-level, results in clearing higher flexible demand, and thus higher electricity cost at the transmission-level. As a result, DERs and fixed loads receive a higher surplus in the centralized approach, while conventional generators and flexible loads are more profitable in the transactive approach.