Dynamic Network Prices for Prosumer-aware Hosting Capacity Management

Abstract: The fast uptake of distributed energy resources (DERs) presents increasing challenges for managing hosting capacity in distribution networks. Existing solutions include direct load control, operating envelopes, and price-based control through dynamic energy prices. Despite their effectiveness, these methods often rely on assumed prosumer behavioural patterns and overlook prosumers' desire to retain control over their devices. Additionally, current fixed or Time-of-Use (ToU) prices are based on spatial and temporal averages, having limited impact on network conditions and DER operation. To address these limitations, this paper proposes a bilevel optimisation framework that explicitly models prosumer decision-making in the design of dynamic network prices. The upper level represents the distribution system operator (DSO), setting network prices under cost-recovery and network constraints, while the lower level models prosumers optimising DER operation in response. The proposed framework preserves customer prerogative, enhances DER flexibility, and offers actionable insights for network hosting capacity management and the evolution of network tariff structures under high DER penetration.