Local flexibility markets: Literature review on concepts, models and clearing methods

Xiaolong Jin, Hongjie Jia

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With high penetration of renewable generation and distributed energy resources (DERs), distribution systems are facing new operational challenges due to their intermittency and uncertainty. To cope with these challenges, distribution system operators (DSOs) are seeking for market tools to enable more active
system management and control using flexibility. Local flexibility markets (LFMs) provide opportunities to trade flexibility among DSOs and other participants (e.g., aggregators) in an economically efficient way. Studies have been carried out to define the concepts, design the mechanisms and formulate the market clearing methods of LFMs in the literature. Therefore, there is a need to classify and organize the literature on potential designs and market clearing methods of LFMs. This paper reviews LFMs, which are currently being discussed and designed to provide trading platforms for local participants, including DSOs and aggregators. Starting with a survey on the concepts and definitions of LFMs, we summarize the key elements, technologies and participants of LFMs. Afterwards the formulations of LFMs and the solution methods for LFM clearing are reviewed, based on which future research directions and ½challenges are suggested in the last section of this paper.
Original languageEnglish
Article number114387
JournalApplied Energy
Number of pages55
Publication statusPublished - 2019


  • Aggregator
  • Distribution system operator (DSO)
  • Local flexibility markets (LFMs)
  • Market designs
  • Market clearing


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