Design of an Auction-based Local Energy Market for Integrated Electricity and Heat Networks Coordinated with Wholesale Market

Abstract

This article presents a market-based framework for coupling of electricity and heat sectors at the local level via power-to-heat (P2H) units. The considered local energy market (LEM) is designed based on an auction-based energy trading process which is settled by the integrated energy system operator (IESO) with the objective of social welfare maximization. Moreover, as part of the suggested mechanism, the coordination between the IESO and the transmission system operator (TSO) is considered to evaluate the mutual impact of the designed LEM on the wholesale electricity market (WEM) and vice versa. To this end, a bi-level programming model is employed, in which the LEM clearing problem is implemented at its upper level (UL) while the WEM clearing problem is executed at its lower level (LL). To assess the operation of the LEM and its coordination with the WEM, a case study is considered in which an integrated energy system (IES), including a 13-node electric distribution system and a 4-node district heating system, is connected to a 6-node transmission system.