# Directly Constraining Marginal Prices in Distribution Grids Using Demand-Side Flexibility

## TL;DR

This paper proposes a duality-based framework for using demand-side flexibility, such as energy storage, to directly constrain marginal prices in distribution grids, reducing volatility and benefiting consumers.

## Contribution

It introduces a novel approach to hedge electricity price volatility by quantifying demand-side flexibility needs and analyzing the economic benefits of forecast-informed ESS operation.

## Key findings

- ESS can effectively hedge against price volatility.
- Operating ESS with forecasts yields economic benefits.
- Framework successfully constrains marginal prices to consumer willingness to pay.

## Abstract

Recently, the volatility associated with marginal prices has increased due to large scale integration of renewable generation. Price volatility is undesirable from a consumer perspective. To address this issue, we present a framework for hedging that uses duality theory for quantifying the amount of demand-side flexibility required for constraining marginal prices to the consumers maximum willingness to pay for electricity. Using our formulation, we investigate the ability of an Energy Storage System (ESS), as a demand-side flexibility source, to hedge against electricity price volatility across a multi-time period horizon while accounting for its inter-temporal constraints. Additionally, we analyze the economical benefit that operating the ESS under information forecasts brings to the consumers.