Techno-economic evaluation of energy markets for demand response and congestion management in future decentralized energy systems

Abstract

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.