With distributed energy sources becoming prominent, it is expected that new market mechanisms would become necessary to overcome the issues caused by the intermittency of those sources. This research determines the effect of certain market mechanisms, which have been proposed to either incentivize the distributed generation or to reduce their undesirable effects, on power flow of a prosumer household. The prosumer household was assumed to consist of PV generation system, an Electric Vehicle which was capable of V2G and a household battery. The market mechanisms used were Feed-in tariffs, Capacity Mechanism and Frequency Containment Reserve. An Energy Management System which determines both, the optimal system size and the optimal power flow by minimizing the operational costs was used to achieve this. It was observed that different level of feed in tariff affected the optimal system size and the power flow. At high feed-in tariff, the system size was the largest and high grid peak power was observed. Furthermore, the introduction of the capacity mechanism in the form of capacity tariffs per kW led to reduction in grid power consumption and feeding in. Finally, it was observed that the energy management system was able to reserve power for the frequency regulation market. Compared to an uncontrolled case, a reduction of 70.26% in total costs was achieved when the EMS control was introduced. A cost reduction of 52.02% compared to the uncontrolled case was achieved when an additional capacity tariff was also introduced to the control. Finally, introduction of the frequency regulation mechanism in the EMS control led to even further reduction in costs with a drop of 1205.07% compared to the uncontrolled case.

In the context of the energy transition, the energy sector is experiencing a paradigm shift towards electrification in a decentralized model, where renewable energy sources are becoming the protagonists. However, such shift comes with several challenges. In particular for this thesis, the intermittency of renewable energy sources coupled with increased load demand and generation from small scale prosumers is expected to increase grid congestion at a distribution level. The main purpose of this thesis is to investigate and evaluate the techno-economic feasibility of novel market mechanisms that incentivize demand response from prosumers for congestion management. The focus of this work is on market-based mechanisms that use economic signals to stir prosumers' demand response. The mechanisms investigated are: 1) hard constraint that physically limits prosumers, 2) capacity subscription, 3) peak tariff, and 4) dynamic tariff; these are capacity mechanisms that limit the peak drawing and feeding power from prosumers. Moreover, the day ahead, intraday and frequency containment reserve (FCR) markets are incorporated to the capacity mechanisms to evaluate their compatibility in the context of the Dutch power markets. The advent of smart energy systems enables prosumers to become active participants in the market and aid in the grid's management. Thus, the approach of this thesis is to simulate prosumers' response to economic signals and evaluate the effects in a low voltage test feeder. To achieve this, the work develops on an existing smart charging algorithm that optimizes the components of the smart energy system. The system is composed of a multi port converter that incorporates a PV maximum power point tracking device (MPPT), a bidirectional EV charger, and a bidirectional battery energy storage (BES) charger; additionally, the grid is connected to a heat pump and load from appliances, which are non-flexible. The distribution network is IEEE's European low voltage test feeder, which is comprised of 55 households. The techno-economic feasibility evaluation is done by benchamarking the capacity mechanisms against an energy tariff in two scenarios: winter, and summer. The benchmark results indicate that aligning prosumers with only an energy tariff leads to congestion in the feeder. In response, all capacity mechanisms evaluated were effective at managing congestion if properly designed, although, some restrict prosumers more than others. The hard constraint made prosumers lose the most load, and the total cost incurred by the prosumers in the feeder was greatest with the capacity subscription. The peak tariff had the lowest cost of lost load, and the least overall costs, consequently, the peak tariff was chosen to incorporate the day ahead, intraday and FCR markets to it. The incorporation of day ahead and intraday markets decreased the exposure to imbalance costs under the assumption that new forecasts with better accuracy were available one time step (15 min) before delivery. The incorporation of FCR increased the exposure to imbalance costs due to deviations from the day ahead schedule. Furthermore, FCR with the peak tariff showed conflicting incentives, i.e., the peak tariff reduces the amount of reserved power for balancing regulation, else if full available power is reserved congestion increases. The results of this thesis point towards the potential that prosumers' demand response will have in shaping future decentralized energy systems, however, the market mechanisms in place need to be properly designed to ensure economic feasibility and resolve conflicting incentives between markets such as balancing and local congestion management.