Social welfare maximization in unbalanced distribution networks under dynamic pricing and power exchange limits

Abstract

This paper presents a two-stage framework to manage bidirectional power exchange between distributed energy resources (DER) and the distribution network. In the first stage, the framework optimizes and schedules DER operations and sets dynamic power exchange prices. The second stage focuses on network constraint management. By shifting from fixed tariffs to dynamic, time-varying pricing, the framework encourages active participation in power exchange among players and the distribution network at the lowest prices. The proposed framework aims to maximize social welfare by coordinating power exchanges, dynamic consumption prices and feed-in tariffs. It seeks to optimize the participation of all involved parties, ensuring effective system management through dynamic pricing and flexible limits on power exchange levels between players and the distribution network. The new pricing scheme is tested with and without profit-seeking community batteries and public charging stations, resulting in a 15.53 %–21.51 % improvement in overall social welfare. The results show that increased player participation enhances social welfare in distribution-level markets without violating any technical constraints of the distribution network.