Mechanism Design for Fair and Efficient DSO Flexibility Markets

Georgios Tsaousoglou*, Juan S. Giraldo, Pierre Pinson, Nikolaos G. Paterakis

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

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The proliferation of distributed energy assets necessitates the provision of flexibility to efficiently operate modern distribution systems. In this article, we propose a flexibility market through which the DSO may acquire flexibility services from asset aggregators in order to maintain network voltages and currents within safe limits. A max-min fair formulation is proposed for the allocation of flexibility. Since the DSO is not aware of each aggregator's local flexibility costs, we show that strategic misreporting can lead to severe loss of efficiency. Using mechanism design theory, we provide a mechanism that makes it a payoff-maximizing strategy for each aggregator to make truthful bids to the flexibility market. While typical truthful mechanisms only work when the objective is the maximization of Social Welfare, the proposed mechanism lets the DSO achieve incentive compatibility and optimality for the max-min fairness objective.

Original languageEnglish
Article number9312120
JournalIEEE Transactions on Smart Grid
Issue number3
Pages (from-to)2249-2260
Publication statusPublished - May 2021

Bibliographical note

Funding Information:
The work of Georgios Tsaousoglou was supported by the European Union's Horizon 2020 Research and Innovation Programme under the Marie Sk?odowska- Curie under Agreement 754462. Paper no. TSG-00817-2020.

Publisher Copyright:
© 2010-2012 IEEE.


  • Aggregator
  • Distribution system
  • Fairness
  • Flexibility
  • Incentive compatibility
  • Mechanism design


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