Co-Optimization of Distributed Renewable Energy and Storage Investment Decisions in a TSO-DSO Coordination Framework

As Distributed Energy Resources (DER) penetration levels and distributed flexibility investments are continuously growing, various smart grid actors need to coordinate their decisions towards optimal DER siting and sizing: First, profit-based Energy Service Providers (ESPs) want to secure their long-term profits and avoid economically unsustainable DER investments. Second, Distribution System Operators (DSOs) need to ensure the reliable operation of their networks in an economically optimal way. Third, Transmission System Operators (TSOs) want to optimally exploit the available “clean” DERs in close collaboration with the downstream DSOs. In this paper, we propose a novel ESP-DSO-TSO coordination scheme to co-optimize distributed renewable energy and storage planning at the distribution network level, while modeling the coordinated TSO-DSO operations. We formulate a bi-level program, the upper-level of which minimizes the DSO's costs, ensuring a minimum rate of return on ESP's investments, while the lower-level models the transmission network-constrained wholesale market. A nested decomposition technique is used to achieve computational tractability. Simulation results showcase a trade-off analysis between sustainable DER investments and system cost minimization and prove that an ESP-DSO-TSO interaction can benefit all involved actors to a certain extent. Finally, the computational efficiency of the proposed nested decomposition algorithm is demonstrated via numerical results.