Retail electricity markets
With increasing pressures to decarbonize the electricity grid, the grid edge is witnessing rapid adoption of customer-owned devices (rooftop solar, EVs). When coordinated appropriately, these devices can help increase grid efficiency and operational flexibility. Programs like net energy metering (NEM) pay resource owners for generated electricity; however these payment structures are inefficient and too expensive. Companies which aggregate the capabilities of small-scale resources are also becoming increasingly prevalent. These aggregators participate directly in wholesale electricity markets (WEM) and make decisions on behalf of resource owners. These participation models pose challenges of 'tier bypassing', where device setpoints determined by aggregators may violate local grid constraints.
In our work, we are pushing the boundaries on what retail electricity pricing looks like in future clean energy grids. We develop a retail electricity market for resources to participate in directly at the local level (i.e. within the distribution grid) and determine a time-varying retail price for end-use customers. Our proposal is that of a hierarchical retail electricity market structure, which addresses grid constraints, commitment reliability of resources, and consumer preferences, at various aggregation and market levels. The distribution-level retail market will be operated by a Distribution System Operator (DSO), through which DERs are scheduled and the real-time distribution-level Locational Marginal Price (d-LPM) are determined through bi-lateral market settlements. Our initial simulations show that the DSO-centric market increases DER utilization, enables continual market participation for DR resources, and most importantly, lowers electricity costs for customers. The resulting lower revenue stream for the DSO highlights the evolving business model of the modern utility, moving from commoditized markets towards performance-based ratemaking.