Ensuring Grid-Safe Forwarding of Distributed Flexibility in Sequential DSO-TSO Markets

This paper investigates sequential flexibility markets consisting of a first market layer for distribution system operators (DSOs) to procure local flexibility to resolve their own needs (e.g., congestion management) followed by a second layer, in which the transmission system operator (TSO) procures remaining flexibility forwarded from the distribution system layer as well as flexibility from its own system for providing system services. As the TSO does not necessarily have full knowledge of the distribution grid constraints, this bid forwarding can cause an infeasibility problem for distribution systems, i.e., cleared distribution-level bids in the TSO layer might not satisfy local network constraints. To address this challenge, we formally introduce and examine three methods aiming to enable the grid-safe use of distribution-located resources in markets for system services, namely: a corrective three-layer market scheme, a bid prequalification/filtering method, and a novel bid aggregation method. Technically, we provide conditions under which these methods can produce a grid-safe use of distributed flexibility. We also characterize the efficiency of the market outcome under these methods and reflect on their practicalities. Finally, we carry out a representative case study to evaluate the performances of the three methods, focusing on economic efficiency, grid-safety, and computational load.