Why baselines are not suited for local flexibility markets

Abstract

The utilization of flexibility from distributed energy resources is necessary, in the course of integration of more renewable energy resources to the power system. On a system level, wholesale markets are well established and operate with the principle of power schedules and balance responsibility. On a distribution level, local flexibility markets have gained attention from both academia and the industry in recent years, and are advocated by EU legislators. In those markets, distribution system operators can gain access to flexibility offered by aggregators, for the purpose of congestion management or postponement of grid reinforcements. Baseline services and capacity limitations represent the two main approaches in trading flexibility locally. This paper reviews existing proposals for baseline mechanisms and presents the challenges of the different approaches. We find that local flexibility markets that rely on baselines are not compatible with the active participation of distributed energy resources in power markets, and the parallel operation of wholesale and local flexibility markets. Service definitions that rely on baselines or schedules may suffer from lack of transparency and simplicity, are prone to manipulation, and may lead to inefficient use of the available resources. We propose the use of capacity limitations services, which represent temporary absolute consumption caps for aggregators, and argue that they are better suited to tackle the challenges of distribution systems operation.