IEEE Power & Energy Magazine - May/June 2016 - 56
(Substation with LMP)
LMP = US$40/MWh
figure 2. An Illustrative example to demonstrate price propagation.
constraints from the ISO/DSO interface to the autonomous prosumer location. In this case, considering the
10% distribution losses, the DLMP is US$74/MWh (it
takes 1.1 MW at the ISO/DSO interface at the price
of US$40/MWh to serve 1 MW of load at the autonomous prosumer location; US$40*1.1*100/1000+¢3=
✔ Case 2-Illustration of prices to devices in a constrained zone: Now assume that because of high
load in the load pocket, the distribution lines serving
the load pocket are at their limits. In this case, the
wholesale LMP cannot penetrate the load pocket and
thus the DLMP is set by the active prosumer offer at
These examples illustrate some similarities and differences between wholesale pricing practices and those relevant
to retail/distribution transactive pricing. The similarities and
differences between wholesale/bulk-power and retail/distribution transactive exchanges and the related seams issues
are further discussed below.
Lessons Learned from
Bulk Power Operations
The emerging TE systems can be viewed as an extension
of the existing wholesale transactive paradigm to retail
and demand side with some new attributes and characteristics. The extensions are both vertical and horizontal. In the
wholesale markets, transactive exchanges have been among
entities [such as traders, load serving entities, UDCs, and
generation companies (GenCos)], whereas the emerging TE
systems paradigm extends the transactive agents to retail and
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grid-edge domains, including intelligent devices. The entities facilitating wholesale transactions are wholesale market
operators and balancing authorities, who have limited or no
visibility to the retail and end-use transactions, which are primarily located within distribution operations domain. Such
transactions need to be facilitated by a new DSO construct
that provides visibility of these transactions according to the
TE system modes.
Many tools, techniques, and processes have been developed over the last two decades for the management of bulkpower operations and wholesale energy markets based on
transactive exchanges among the various entities noted above.
These include scheduling, pricing, transmission capacity reservation, transmission rights auctions, and congestion management, among others, both in bilateral and centralized
market environments. These mature and proven tools and
techniques provide an effective framework for management
of bulk-power economics and reliability.
Lessons learned from the bulk-power experience can
be applied to transactive exchanges among distributed
resources, demand-side operations, microgrids, retail market operators, and DSOs. Furthermore, by adopting, extending, and modifying where necessary, an established set of
industry processes for such activities as registration, qualification, scheduling, clearing, adjusting, curtailing, and settling, one could achieve quicker acceptance by a broader
range of industry stakeholders.
TE systems provide for multilevel hierarchical information exchange and control. The underlying smart grid
infrastructure may be used to aggregate, schedule, and dispatch demand-side resources in a way that, from a system