Distribution Markets

The proliferation of proactive customers in distribution systems may be considered as one of the factors driving changes in system operation and control. These changes may require revisiting the traditional utility business models. With the proliferation of proactive customers, the adoption of distributed energy resources (DERs) is also increasing, largely due to the falling cost of the DER technologies, numerous economic incentives and a more ubiquitous utilization of demand response (DR) practices using smart appliances. These customers, on one hand, may provide benefits for the power system as they can potentially reduce system peak loads, shape the system load profile, and defer required generation and transmission upgrades. On the other hand, a large penetration of these "proactive" customers could challenge the economic and reliable operation of the power system. Considering the significant changes that are occurring in the distribution sector, utilities may need to find new solutions to address the needs of future power grids. This article addresses these needs by investigating the conceptual framework of a "Distribution System Operator (DSO)" as a novel solution that can be adopted by distribution utilities. This article further focuses on the benefits and drawbacks of implementing a DSO, roles and functionalities, and specific requirements.