Optimal Operation Mechanism for Local Markets Based on Joint Sharing of Energy and Reserve

When wholesale and local markets operate independently, prosumers with distributed renewable energy (DRE) cannot access wholesale market price signals but adhere to the contract price. Besides, prosumers are not responsible for the dynamic balance of the power system despite creating huge uncertainties. The mismatch of rights and responsibilities makes prosumers unmotivated to optimize their operation. The potential of the adjustment ability from the demand side is underutilized. To address this issue, this paper proposes an optimal operation mechanism for the joint sharing of energy and reserve in local markets. A bi-level trading model based on the Stackelberg game is established, in which the retailer serves as the intermediary between the wholesale and the local market to send price signals to prosumers. Prosumers share energy and reserve jointly as an alliance in a cooperative way. The model is converted and solved using KKT conditions and the triangle method. Case studies demonstrate the proposed mechanism unifies the rights and responsibilities of prosumers while improving the profits of all market players.