Distributed electricity markets and distribution locational marginal prices: a review

As part of the transition from distribution network operator to distribution system operator (DSO), decentralised pricing of energy is an area that needs to be considered. This paper considers different roles for the DSO in facilitating distributed markets including the decentralised and centralised approaches. The latest work in distributed markets has been reviewed including two major pilot projects involving DSO type operation of distribution markets. The use of distribution locational marginal prices (DLMPs) in distributed markets has been studied as a promising means of directing investment and managing constraints in distribution systems. Some simple case studies involving DLMPs in an example distribution network were modelled using Matpower and it was seen that marginal prices could result in reduced losses and congestion if DLMPs are passed on to distributed energy resources. A case was considered of a bus with losses resulting in DLMPs 6% above the grid import cost and it was seen if the DLMP market was used a generator installed at this bus could reduce the cost of losses by up to 14%.