A Nash Bargaining Approach for TSO-DSO Flexibility Coordination

The integration of large-scale distributed energy resources (DERs) requires the coordination of transmission and distribution systems to guarantee system balance. In this paper, we construct a Nash bargaining game to investigate the flexibility coordination between transmission system operator (TSO) and distribution system operators (DSOs). To resolve the anticipated system imbalances, TSO and DSOs aim to determine their energy exchange and dispatch level through bargaining to minimize the operational costs. It is challenging to solve the Nash bargaining solution due to the non-convex optimization problem. To address the computational complexity, we decompose the original Nash bargaining game into two sub-problems: the social cost mini-mization problem and the benefits sharing problem. To ensure privacy during the bargaining process, we adopt the Alternating Direction Method of Multipliers (ADMM) algorithm to obtain the optimal flexibility trading amount and resource sharing payment. Numerical results show that TSO and DSOs are better off by participating in the Nash bargaining game, demonstrating the benefit of sharing.