Addressing challenges induced by transactive energy: Implications for network cost allocation policy in distribution systems

While transactive energy (TE) enables market-based mechanisms that enhance the integration and management of renewable energy, its implementation can also push the distribution system toward its operational limits. To mitigate this, network cost allocation (NCA) methods can be used to distribute costs and incentivize TE participants to adjust their trading capacities in accordance with the network conditions. However, most NCA methods were developed for transmission systems with centralized markets, which contrasts to TE application as local electricity markets in distribution networks where TE is typically applied. To address this gap, this study develops a guideline for TE operation that maintains distribution network reliability and overcomes local-based energy trading barriers through the implementation of NCA methods. The guideline explains how NCA method should account for the network-related physical properties while considering the nonphysical properties to support comprehensive TE decision-making strategies. Numerical simulation under varying network conditions and market variations are employed as proof-of-concept, assessing the applicability of NCA method through tailored metrics for each property. As a result, the selection of NCA methods is determined based on the numerical evidence demonstrating high scores across all assessed physical and non-physical properties. The guideline establishes transferable foundations for optimizing policies associated with the development of NCA methods for TE.