Real-time Market-based Coordination Mechanism for Transmission and Distribution Networks

Distributed energy resources (DERs) such as renewable generation, energy storage and flexible loads have been acknowledged as the key drivers to transform the passive distribution networks into proactive players in the electricity market. In order to reduce the communication and computational complexity of integrating the huge number of DERs into the power system operation, the distribution system operator (DSO) is considered as the central controller to take charge of the dispatch of all the DERs within a distribution network. Through the exchange of boundary power flows and control signals, the independent system operator (ISO) coordinates all the DSOs to achieve certain social objective. In this paper, we study the interactions between the ISO and all the DSOs in both the day-ahead market and the real-time balancing market. Particularly, we identify that the locational marginal price (LMP) based real-time market is unfair and discourages the integration of DERs. To achieve a win-win solution for both the ISO and the DSOs, we propose a real-time coordination mechanism to determine the power dispatch and the corresponding charge/payments via a Nash bargaining problem. Numerical results show that our proposed mechanism guarantees that the ISO and all the DSOs can cooperatively maximize the social welfare and share the benefits fairly due to the cooperation.