Interdependency of Transmission and Distribution Pricing

TL;DR

This paper explores how distribution market operator (DMO) pricing interacts with transmission prices, analyzing benefits and challenges through simulations to inform future power system market designs.

Contribution

It investigates the relationship between distribution locational marginal prices and transmission prices within the DMO framework, providing insights into pricing mechanisms.

Findings

D-LMPs are influenced by T-LMPs and local system conditions.

Simulation results highlight benefits of DMO pricing for system efficiency.

Drawbacks include potential price volatility and complexity.

Abstract

Distribution markets are among the prospect being considered for the future of power systems. They would facilitate integration of distributed energy resources (DERs) and microgrids via a market mechanism and enable them to monetize services they can provide. This paper follows the ongoing work in implementing the distribution market operator (DMO) concept, and its clearing and settlement procedures, and focuses on investigating the pricing conducted by the DMO. The distribution locational marginal prices (D-LMPs) and their relationship with the transmission system locational marginal prices (T-LMPs) are subject of this paper. Numerical simulations on a test distribution system exhibit the benefits and drawbacks of the proposed DMO pricing processes.