Effects of flexibility contracts on manual frequency restoration reserve market considering transmission system flexibility issues

One of the solutions to cope with the increased need for flexibility in power systems is contract-based trading of power flexibility (FlexCon). Such contracts aim to overcome the uncertainties of renewable generation and variation of consumption. The effects of FlexCons on the existing market environment—especially on balancing markets (BLMs)—need to be explored further. Accordingly, this paper presents a methodology to optimize FlexCons and manual frequency restoration reserve–energy activation market (mFRR-EAM) considering the transmission system flexibility issues. FlexCons are between variable renewable energy producers (VREPs) and electricity retailers (RETs), and through this instrument, participants can exchange their deviation of production and consumption from their day-ahead market (DAM) schedule as a source of power flexibility to cope with the volatile market prices and assist with solving flexibility needs. In the proposed methodology, introduced entities as FlexCon operators clear FlexCons in different locations of the system and send the results to FlexCon participants and the transmission system operator (TSO). Subsequently, the TSO clears the mFRR-EAM close to the real-time power delivery to address the remaining flexibility requirements. The impacts of considering FlexCons along with the mFRR-EAM on operational and economic aspects of the social welfare maximization problem of mFRR-EAM and optimal power flow outcomes are assessed. A three-bus illustrative example and a modified IEEE 30-bus system are used as case studies. The results indicate that when considering FlexCons in the system, a lower flexibility price and lower operation cost in the mFRR-EAM can be achieved. Moreover, the presence of FlexCons along with the mFRR-EAM contributes to lower congestion in transmission lines.