DER flexibility procurement in a centralized ancillary services market: the significance of positive TSO-DSO interaction

Abstract

The integration of high levels of renewables necessitates the procurement of distributed energy resources (DERs) for flexibility-based services, such as frequency, reactive power provisions, and congestion management, to ensure secure operation at both transmission and distribution levels. However, procuring flexibility-based services from DERs presents challenges due to the interdependencies in service activations between the TSO and DSO. One potential solution is to acquire DER flexibility through a centralized market jointly managed by the TSO and DSO. This presents two key challenges: i) the allocation of DER services cost between TSO and DSO based on their specific objectives; and ii) the quantification of the cross-impact cost. To address these challenges, this manuscript proposes cost allocation by considering the TSO’s objective of global balancing and the DSO’s responsibilities for congestion management and maintaining reactive power provisions. The obtained results show that the cost distribution shifts due to the cross-impact of one system operator’s actions on the other, highlighting the need for coordination, though the total cost of flexibility procurement remains largely unchanged outside peak times. Further, the reactive power provision and distribution system congestion lead to increased cost share for the DSO, despite stable overall procurement costs. This is driven by the DER’s active power adjustments to maintain the Q/P ratio, leading to subsequent opportunity cost for the DSO.