A Novel Interior-Exterior Approach for the TSO-DSO Based Bilevel Optimal Power Flow

Interconnected transmission and distribution systems operation is inherently hierarchical. Hence, strategic interaction between Transmission System Operator (TSO) and Distribution System Operators (DSOs) is inevitable. Based on the scheduling hierarchy and despatch, such interactions are modeled as Bilevel Optimal Power Flow (BOPF). However, the direct solution of BOPF for AC networks is challenging due to the leader-follower structure. Hence, previous works have often used DC and linearized AC networks for the follower's OPF, which are often infeasible for AC networks. Also, BOPF is stated as a Mathematical Program with Complementary Constraints (MPCC) by replacing the follower's OPF with associated optimality conditions. However, the related justification (constraint qualification satisfaction in ACOPF) is missing in previous works. We provide such a justification in this article and propose a novel mixed interior-exterior penalty-based approach for the solution of KKT-reformulated TSO-DSO-based BOPF as MPCC. The proposed method has superior convergence and is robust to the choice of penalty parameter when tested on five test systems compared to Sequential Linear Programming (SLP) and two other methods. BOPF's solution gives Stackelberg equilibrium-based schedules for TSO and DSOs in respective markets with high supplier profits in the Wholesale Electricity Market (WEM) compared to the distributed OPF's solution.