A Hierarchical Local Electricity Market for a DER-rich Grid Edge

With increasing penetration of distributed energy resources (DER) in the distribution system, it is critical to design market structures that enable smooth integration of DERs. A hierarchical local electricity market (LEM) structure is proposed in this paper with a secondary market (SM) at the lower level representing secondary feeders and a primary market (PM) at the upper level, representing primary feeders, in order to effectively use DERs to increase grid efficiency and resilience. The lower level SM enforces budget, power balance, and flexibility constraints and accounts for costs related to consumers, such as their disutility, flexibility limits, and commitment reliability, while the upper level PM enforces grid physics constraints such as power balance and capacity limits, and also minimizes line losses. The hierarchical LEM is extensively evaluated using a modified IEEE-123 bus with high DER penetration, with each primary feeder consisting of at least three secondary feeders. Data from a GridLAB-D model is used to emulate realistic power injections and load profiles over the course of 24 hours. The performance of the LEM is illustrated by delineating the family of power-injection profiles across the primary and secondary feeders as well as corresponding local electricity tariffs that vary across the distribution grid. Through numerical simulations, the hierarchical LEM is shown to improve the efficiency of the market in terms of lowering overall costs, including both the distribution-level locational marginal prices (d-LMP) as well as retail tariffs paid by customers. Together, it represents an overall framework for a Distribution System Operator (DSO) who can provide the oversight for the entire LEM.