Maximizing social welfare in local flexibility markets by integrating the value of flexibility loss (VOFL)

Abstract

The increasing integration of Renewable Energy Sources (RESs) poses challenges due to their unpredictable nature. To address these challenges, flexible Distributed Energy Resources (DERs), such as Distributed Generators (DGs), Flexible Loads (FLs), and Energy Storage Systems (ESSs), have emerged in distribution networks. This paper proposes a linear programming formulation for optimizing flexibility provision in the Local Flexibility Market (LFM) to maximize Social Welfare (SW), contrasting with existing literature. The concept of the Value of Flexibility Loss (VOFL) is introduced to enable the Distribution System Operator (DSO) to optimize flexibility procurement, ensuring economic profitability for both providers and consumers. Additionally, the DSO can interchange flexibility with the Transmission System Operator (TSO) based on economic incentives. Numerical results demonstrate the accuracy and efficiency of the proposed model.