Designing a local flexibility market for buying back capacity from electricity consumers connected to the distribution network

The proliferation of flexible resources in the electric distribution network and their active management have already started to cause congestion problems, mainly in areas with significant electric vehicle penetration. In this work, we study the reduction of usable capacity as a congestion management measure in a local flexibility market context. Using an extensive two-year residential charging dataset from Denmark, we highlight the problems caused by the almost 50% non-utilized capacity on an aggregated level of household chargers. We discuss and address various market design challenges and the implications of free excess capacity by treating aggregated capacity as a divisible good that can be traded between a distribution system operator (DSO) and flexibility service providers. The use of capacity blocks streamlines service delivery and overcomes many of the challenges of using explicit services. Finally, we show empirically that a simple, uniform pricing, two-stage auction significantly reduces DSO payments and mitigates the issue of excessive profit margins compared to a single-stage auction. • Design of capacity limitation services based on homogeneous capacity blocks. • Assessment of actual aggregator costs with real-life EV charging data. • Non-utilized aggregated capacity has a severe impact on market clearing outcomes. • Uniform pricing inflates aggregator profits in a capacity limitations-based market. • The proposed two-stage auction design avoids excessive aggregator profits.