IEEE Power & Energy Magazine - May/June 2016 - 64

Industry discussions about the future TE system with
high DERs implicitly assume a version of the grand central,
minimal DSO paradigm.

entails operation of both the distribution and transmission
systems as well as the interfaces between them.
One vision is based on a centralized, whole-system optimization performed by the transmission system operator
(TSO), which may also operate wholesale spot markets as
an independent system operator (ISO) or regional transmission organization (RTO). Under this model, the TSO needs
detailed information and visibility into all levels of the system, from the balancing authority area down through the
distribution system to the meters on end-use customers and
distribution-connected devices on both the customer side
and the utility side of the meter.
The other vision involves a decentralized, layered-decomposition optimization structure, for which optimization at
any given layer of the system only requires visibility to the
interface points with the next layers above and below and
does not need visibility to what's inside those other layers.
The TSO under this layered optimization paradigm would
see a single virtual resource at each transmission-distribution interface-each pricing node in ISO/RTO regions that
operate locational marginal pricing (LMP) markets-and
would not need to be concerned with the individual DER or
customers below the interface. This is not unlike the existing
operational paradigm between balancing authorities, which
primarily focuses on interchange flows between balancing
authority areas.
Each of these visions can be used to characterize a different mature end state of the high DER electric system. Some
participants in current industry debates may argue that this
dual scheme omits designs that eschew all forms of system
optimization in favor of complete reliance on autonomous
responses to price signals. Our view is that proponents of
such designs still implicitly assume some central mechanism
to calculate the needed price signals with a high degree of
locational and temporal granularity. Some entity or mechanism must be running at all times to calculate prices that
align with grid conditions.
The two visions are deliberately drawn as conceptually
distinct to reveal key operational design choices and derive
some observations to help inform today's policy, market
design, and system architecture discussions. The choice of
which vision to aim for in any jurisdiction will have major
implications for specifying the complementary roles and
responsibilities of the distribution system operator (DSO)
and the TSO and, consequently, for the business model of
the distribution utility. The choice will also imply different
64

ieee power & energy magazine

directions on questions like the value of distribution-level
LMP, the optimal uses of markets and controls to maintain
reliable system operation, and the benefits of decentralization for enhancing system security and resilience. Perhaps
surprisingly, both visions can fully support distribution-level
peer-to-peer transactions, assuming that the regulators adopt
regulatory frameworks to enable such transactions.

The Grand Central Optimization
The grand optimization vision is the logical extension of
the wholesale market structure that exists in ISO/RTO
areas today, but with much greater quantities and diversity
of DERs participating in the wholesale markets, including
DERs on both the customer side and the utility side of the
meter, both individually and as aggregations into virtual
resources. The structure of wholesale market participation
by DERs can remain much as it is today, with the ISO/RTO
issuing dispatches and the DSO providing coordination services and utilizing qualified DERs to support distribution
system operations where feasible and economic.
Under the most likely version of this model-the minimal DSO model-the TSO would see DERs in its optimization as if they were located at the T-D substation, consistent
with how the wholesale markets operate today. Under a more
extreme version-the Total TSO model-the TSO's network
model would include the distribution circuits and model the
DERs at their actual locations on those circuits. The Total
TSO requires such detail because spot market pricing or
even direct operational controls rely on an accurate power
system model including asset ratings, status and topology
to perform real-time state estimation of power flows to calculate prices and control signals. Such technical complexity and the regulatory jurisdiction issues it raises mean that
the Total TSO, although interesting as a concept, would be
impractical to implement. In either case, the DSO would
have to take on substantial new functions to coordinate the
activities of DERs on its system to maintain system reliability as the DERs respond to TSO dispatch instructions while
providing other services to end-use customers and possibly
the distribution system. The distribution asset owner, who
may or may not be the same entity as the DSO, would still
be responsible for maintaining and operating the physical
assets, analogous to the role of participating transmission
owners in ISO/RTO areas today.
The grand optimization paradigm could be fully compatible with distribution-level markets, including markets
may/june 2016



Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - May/June 2016

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IEEE Power & Energy Magazine - May/June 2016 - Cover3
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