Mechanism Design for Fair and Efficient DSO Flexibility Markets
- Georgios Tsaousoglou ,
- Juan S. Giraldo ,
- Pierre Pinson ,
- Nikolaos Paterakis
Abstract
The proliferation of distributed energy assets necessitates the
provision of flexibility to efficiently operate modern distribution
systems. In this paper, we propose a flexibility market through which
the DSO may acquire flexibility services from asset aggregators in order
to maintain network voltages and currents within safe limits. A max-min
fair formulation is proposed for the allocation of flexibility. Since
the DSO is not aware of each aggregator's local flexibility costs, we
show that strategic misreporting can lead to severe loss of efficiency.
Using mechanism design theory, we provide a mechanism that makes it a
payoff-maximizing strategy for each aggregator to make truthful bids to
the flexibility market. While typical truthful mechanisms only work when
the objective is the maximization of Social Welfare, the proposed
mechanism lets the DSO achieve incentive compatibility and optimality
for the the max-min fairness objective.