Optimisation of Aggregate Demand Flexibility in Smart Grids and Wholesale Electricity Markets: A Bi-Level Aggregator Model Approach

The transition toward intelligent and sustainable power systems requires practical schemes to integrate industrial demand flexibility into short-term operation, particularly in emerging electricity markets. This paper proposes an integrated framework that combines data-driven flexibility characterisation with a bi-level optimisation model for an industrial demand-side aggregator participating in the short-term balancing market. Flexibility is identified from AMI data and process information of large consumers, yielding around 2 MW of interruptible load and 3 MW of reducible load over a 24 h horizon. At the upper level, the aggregator maximises its profit by submitting flexibility offers; at the lower level, the system operator minimises balancing costs by co-optimising thermal generation and activated flexibility. The problem is formulated as a mixed-integer linear programming model and is evaluated on a real subtransmission and distribution network of a local utility in Ecuador, with ex-post power flow validation in DIgSILENT PowerFactory. Numerical results show that, despite the limited flexible capacity, the aggregator reduces the maximum energy price from USD/MWh 172.32 to 139.59 (about 19%), generating a daily revenue of USD 2475.15. From a network perspective, demand flexibility eliminates undervoltage at the most critical bus (from 0.93 to 1.03 p.u.) without creating overvoltages, while line loadings remain below 50% in all cases and total daily technical losses decrease from 89.46 to 89.10 MWh (about 0.4%). These results highlight both the potential and current limitations of industrial demand flexibility in short-term markets.