A tri-level model for optimal management of active distribution networks enabling two-layer local markets

The deregulation of distribution systems enable local energy trading under the umbrella of local market strategies, which are launched and cleared by local entities like distribution system operators. The emergence of active players connected to distribution networks such as microgrids path the way to two-layer market structures, within which different local markets must coexist and coordinate. This new paradigm advocates for developing new management and market models suitable for multi-level local markets. This paper focuses on this issue. In particular, a new management model for active distribution networks enabling two-layer local markets is developed, which casts as an original tri-level optimization approach. This paper applies the developed methodology to the case in which different microgrids connected to a distribution market launch local markets for energy trading within the microgrid, but it could be applied to similar frameworks such as energy communities or virtual power plants. The new approach stablishes a game-oriented market coordination which preserves the hierarchical feature of the coordinated market strategy. A case study on a 33-bus radial distribution network serves to validate the model and illustrates how active players such as distributed generators and flexible demands perform under local market rules. A number of scenarios are studied under different distributed generation and microgrid penetration, showing that incrementing the number of both leads to improve the economy of the distribution system operator and microgrids. Finally, a sensitivity analysis regarding the renewable generation potential is studied.