A Distributionally Robust Optimization Approach for Local Electrical Market Interaction With Wholesale Electrical Market and Prosumers Within the Framework of Transactive Energy Concepts

This paper presents a new tri-level optimization approach to financial interaction the local electricity market (LEM) with prosumers and the wholesale electricity market (WEM) based on transactive energy (TE) concepts under uncertainty. In the first level of the problem, prosumers are modeled as separate microgrids, which use smart vehicle charging strategies with high penetration of renewable energy sources (RESs) to minimize expected operation costs by submitting offers/bids to the LEM. The LEM also seeks to minimize its expected operating costs at the second level problem by considering the physical constraints of the electricity distribution network (EDN) and by using demand response programs (DRPs). At the third level problem, the WEM, considering the physical constraints of the transmission network (TN) and the high penetration of wind farms, seeks to market-clearing for maximized social welfare. The equilibrium of the proposed tri-level problem is proved by applying a new hybrid Karush–Kuhn–Tucker (KKT) & two-stage iterative-based method. A moment-based distributionally robust optimization (DRO) algorithm has been developed to provide a robust solution against the uncertain behavior of RESs in prosumers and wind farms in the WEM based on the TE concepts. The case studies are simulated by three networked microgrids, a standard 33-bus EDN test system and a standard 6-bus transmission test system. The results of the case studies show that the proposed TE-based framework can effectively coordinate the optimal scheduling of all three main levels, namely prosumers, LEM and WEM, to reduce expected operating costs significantly.