Optimal DSO/Market Coordination for the Activation of Distributed Flexibility

Optimally coordinating flexibility resources is an ever more critical element of ensuring thesupply and demand balance at all hours in decarbonizing electricity systems with a highshare of variable renewables. This paper estimates the value of coordinating local flexibilityproviders through competitive wholesale markets of Central Western Europe (Austria,Belgium, Switzerland, Deutschland, France, Spain, Great-Britain, Ireland, Italy, Luxembourg,Northern Ireland, Netherlands and Portugal) as well as the resulting investment needs at thelevel of the French distribution grid in 2030. It is based on detailed data of the electricitysystem, energy mix previsions from 2016 and consumption and production data for every2000 substation of the French distribution network. A key result of this paper is that theeconomic welfare gains of coordinating multiple heterogeneous local flexibility resources aresubstantial while requiring only limited investments in the extension of local distributiongrids. With a real-time activation signal, coordinating distributed flexibility in the wholesalemarket will generate a welfare gain of 1.4 billion Euros due to savings in both operationaland fixed investment costs in comparison with a situation where no flexibility is offered. Thisgain can be realized at a cost increase for the reinforcement of distribution networks requiredby these flexibility activations of only 100 million Euros, mostly concentrated on urbanstations with high EVs penetration. Subsequently, the paper offers several extensions suchas, for instance, the impact of an easier to implement and predictable longer-term flexibilityactivation signal, for which the total gains are only 30% lower. Another extension studied isthe implementation of a filtering by the DSO of flexibility activations with particularly highpower swings with the help of a local "Maximum Power Indicator", which allows furtherwelfare gains. Overall, the paper provides modelling evidence of the value of aggregatinglocal flexibility resources at the level of the wholesale market, their limited costs in terms ofrequired reinforcements and the benefits of a coordination between issues at local level (gridreinforcement) and European level (generation cost).