A Survey on the Participation of Distributed Energy Resources in Balancing Markets

Distributed Energy Resources (DER) participation in the conventional balancing market operated centrally by the Transmission System Operator (TSO) presents challenges such as neglecting the operational constraints of Distribution System Operators (DSO) and increased communication requirements from many small units. Participation of DER in a DSO-operated local balancing market can mitigate these challenges to some extent. However, in such a market model, if operated independently from the central balancing market, individual costs for the TSO and the DSO might be higher. Therefore, the coordination between the TSO and the DSO is important to ensure that the global cost to the system is minimized. Apart from the market design, there are other issues related to the participation of DER in balancing markets such as minimum bid size, which can be mitigated through the use of aggregators, and the imbalance settlement process, which involves penalizing or rewarding participants through various pricing mechanisms. This paper reviews most of the features necessary for a successful participation of DER in balancing markets, including different market architectures, the role of aggregators and pricing mechanisms in balancing markets.