Flexibility Utilization Enabling Business Models and Tariff Structures

Abstract

The future distribution network needs more flexibility to deal with the uncertain demand and the increasing number of renewable distributed generations. Although flexible customers located in the distribution network can be used as flexible energy resources, they should be motivated enough so to actively provide flexibility. Local markets and dynamic tariff structures are two methods proposed to incentivize customers. Local markets give distribution system operators (DSO) the opportunity to buy their required flexibility from customers and the customers can make profits by selling their flexibility. Dynamic tariff structures can also monetarily benefit flexible customers if they react to the flexibility requirements. The paper develops these two methods mathematically in a more simple way. It also reviews pricing mechanisms and proposed a tariff design for the DSO that varies according to the location and time. Finally, it implements the tariff design and compares these two methods in the discussion section.