DLMP-based Coordination Procedure for Decentralized Demand Response under Distribution Network Constraints

Abstract: Load aggregators are independent private entities whose goal is to optimize energy consumption flexibilities offered by multiple residential consumers. Although aggregators optimize their decisions in a decentralized way, they are indirectly linked together if their respective consumers belong to the same distribution grid. This is an important issue for a distribution system operator (DSO), in charge of the reliability of the distribution network, it has to ensure that decentralized decisions taken do not violate the grid constraints and do not increase the global system costs. From the information point of view,the network state and characteristics are confidential to the DSO, which makes a decentralized solution even more relevant. To address this issue, we propose a decentralized coordination mechanism between the DSO and multiple aggregators that computes the optimal demand response profiles while solving the optimal power flow problem. The procedure, based on distribution locational marginal prices (DLMP), preserves the decentralized structure of information and decisions, and lead to a feasible and optimal solution for both the aggregators and the DSO. The procedure is analyzed from a mechanism design perspective, and different decentralized methods that could be used to implement this procedure are presented.