Embedding operating envelopes in the market design to unlock the flexibility potential of distribution grids

The increased need for flexibility by transmission system operators requires an increase in participation of distributed flexibility. However, this participation must concurrently ensure the operational security of the distribution grids, so as not to violate distribution system operational constraints through transmission-level flexibility activations. Towards this end, this paper studies the operating envelope (OE) approach for dynamically including distribution system constraints in transmission system flexibility markets. The paper considers three OE grouping levels (i.e., system level, flexibility provider level, or resource level) and different network models (i.e., power transfer distribution factors, LinDistFlow, and second-order cone programming formulations) for the calculation of the OEs. The approach is then benchmarked against the market formulations with full inclusion of network constraints. A case study analysis showcases that these OE network abstraction methods can be used to promote the utilization of distributed flexibility in a secure manner. However, their application differs in terms of grid-safety guarantees, resulting impact on market efficiency, and the volume of constrained flexibility imposed by the grid limits.