Hierarchical Coordination of Transmission and Distribution System Operations in European Balancing Markets

We propose a hierarchical scheme for the coordination of transmission and distribution system operations, which is inspired by nested decomposition and tailored for integration in upcoming European balancing markets. We compare our proposal to a number of recent European research projects and pilots. We demonstrate the effectiveness of our proposal in resolving a number of transmission-distribution coordination dilemmas, including conflict resolution between network operators, self-healing, sharing charges in mutually beneficial actions, and the recursive integration of distributed resources in pan-European balancing markets. We implement a proof-of-concept market clearing platform that can match transmission and distribution system market orders, cope with non-convexities in market offers and power flow constraints, scale to systems of realistic size, and respect the decentralization of communications and information sharing which is required in European electricity markets. We demonstrate the effectiveness of our platform on large-scale instances of the Italian and Danish power systems based on data sourced from the EU Horizon 2020 SmartNet project. We demonstrate the superiority of our approach to alternative coordination schemes in terms of economic efficiency, alignment of incentives and system security.