Grid Impact Aware TSO-DSO Market Models for Flexibility Procurement: Coordination, Pricing Efficiency, and Information Sharing

This paper proposes five market models for the procurement of flexibility by transmission (TSO) and distribution system operators (DSOs), based on several TSO-DSO coordination schemes, including a disjoint distribution, disjoint transmission, common, fragmented, and multi-level market. The properties of these models are then analyzed. In particular, we prove that the common market is more efficient than the other market models. Then, different methods are proposed to adequately price TSO/DSO interface flows, when procuring cross-grid flexibility. We show that when interface flows are optimally priced, the fragmented and multi-level market solutions converge to those of the common market. To prevent the need for any network information sharing in the coordination schemes, decomposition methods based on bi-level programming and the alternating direction method of multipliers (ADMM) are proposed. A developed case study, considering an interconnected transmission-distribution system, corroborates the greater efficiency of the common market, the effect of adequate interface pricing on reducing procurement costs, and the capability of the decomposition methods to reach optimal market solutions with limited information exchange.