Decentralized optimization for effective coordination of transmission and distribution systems with dynamic DER aggregation

FERC Order No. 2222 was issued to remove barriers to integrating distributed energy resources (DERs) into wholesale electricity markets and improve economic incentives for their adoption, which promotes benefits such as enhanced operational efficiency, reduced carbon emissions, and lower consumer costs. However, integrating DERs presents significant techno-economic challenges due to their unique characteristics compared to conventional generators. Existing wholesale markets primarily accommodate large generators connected to high-voltage transmission grids, neglecting the complexities of the unbalanced low-voltage distribution networks (DNs) that integrate DERs. Consequently, transmission operators cannot effectively assess the impacts of DER dispatch on distribution systems, potentially causing operational inefficiencies and pricing inaccuracies. To address these challenges, this paper develops a novel decentralized optimization approach utilizing reduced DN models, wherein DER market offers are aggregated based on their locations along the primary feeder of the distribution system into networks of virtual power plants (VPPs), thus facilitating coordinated transmission and distribution (T&D) operations. Additionally, a five-stage testbed is proposed to simulate coordinated T&D dispatch and evaluate solution performance across multiple scenarios. Simulation case studies on IEEE 6-, 118-, and 300-bus transmission systems integrated with modified 43-bus distribution networks have demonstrated the effectiveness and efficiency of the proposed framework, which obtains high-quality solutions requiring fewer deviations from scheduled dispatch levels compared to traditional methods, particularly for systems with interconnections between DNs.