Transmission and Distribution Coordination Framework Using Parametric Programming: Optimal Pricing in The Distribution Systems

Abstract

A parametric-programming-based framework was previously proposed to coordinate the market operations of the independent system operator (ISO) and the distribution system operator (DSO). This paper extends this framework by investigating optimal DSO pricing in addition to the ISO-DSO coordinated dispatch. In our DSO pricing problem, after ISO clears the wholesale market, the locational marginal price (LMP) of the ISO-DSO coupling substation is determined, the DSO utilizes this price to solve the DSO pricing problem. The DSO pricing problem determines the distribution LMP (D-LMP) in the distribution system and calculate the payment to each aggregator. Proofs are provided to 1) demonstrate the D-LMP at the ISO-DSO coupling substation from this DSO pricing problem always aligns with the wholesale LMP from the ISO; and 2) demonstrate the relationship between the DSO pricing and dispatch models. Case studies on a small illustrative example verify the performance of the proposed pricing model.