IEEE Power & Energy Magazine - July/August 2016 - 44

services to this list (see figure 3),
which we consider complete for
Energy-Related Services
Network-Related Services
today's power systems.
The implementation of a comElectrical Energy
Network Connection
prehensive system of prices and
Firm Capacity
Black Start
Voltage Control
T&D Deferral
charges, without the traditional
simplifications associated to the
Primary Operating Reserves
Power Quality
trickling down paradigm, brings a
new set of challenges. The first one
Secondary Operating Reserves
Energy Loss Reduction
concerns how much the distributed
Tertiary Operating Reserves
Mitigation of Network Constraints
agents need to know to participate
efficiently as suppliers, consumers,
or both. In other words, how far figure 3. Energy- and network-related electricity services.
should the granularity of the economic signals of prices and charges in space and time be extended for these agents? figure 4 ers. let us consider prices first. Many power systems in the
describes several options, in increasing order of complexity of world, mostly in some north, central, and south american
pricing and level of participation activity. Ideally, location and countries, use lMP to value electricity at each node of the
time-differentiated prices for each electricity service should transmission network and at every prescribed time interval.
reach every agent, even every appliance that the agent owns, conceptually, at least, lMPs could be extended to all nodes at
but practical reasons may advise differently. Deciding the op- the transmission/distribution divide, or better at the meshed/
timal granularity-i.e., how far to go with spatial and time radial divide, and even beyond the divide, reaching out to the
differentiation-of all relevant prices and charges is a major medium- to low-voltage transformers, or all the way to each
design issue for the power sector of the future. aggregators distribution node where network users are located. Ideally,
can reduce this complexity significantly, perhaps with only a again, this could be done for the price of energy and also
small loss of efficiency, as indicated in figures 5 and 6. aggre- for the prices of other services, like the operating reserves.
gation is defined here as the act of grouping distinct agents in aggregators, as indicated above, could reduce the commua power system (i.e., consumers, producers, or any mix there- nication and computational burden of the individual agents.
The other major component of the economic signals is
of) to act as a single entity when engaging in power system
markets (both wholesale and retail) or selling services to the network charges, always a regulated constituent of the electricity tariff. Regarding network charges, the separation
system operator(s).
The second challenge is to make the system of prices and between the worlds of transmission and distribution has
charges as seamless as possible along the transmission/distri- been complete until now. under the most advanced regulabution divide. as indicated earlier, ideally this divide could tions, transmission costs are presently shared between those
naturally fall where the network ceases to be operated as who benefit from these facilities, namely the large generameshed and becomes radially operated. This typically hap- tors connected in this network and the demand attached to
pens at the high- to medium-voltage distribution transform- the nodes that withdraw electricity from it. The three basic

Flat, Average Rates;
Little-to-No Locational
or Temporal Variation
or Customer Response

Status Quo

End-User or Load
Aggregator Response
to Time- and LocationDependent Prices Set
for Blocks of Time (Not
Real Time)

Time-of-Use Rates;
Aggregators
Participate in
Wholesale Markets

Nonautomated
Response; End-User
(or More Likely,
Aggregator)
Response to DLMPs

LMPs Throughout
Meshed Network;
Aggregators See LMPs
and Participate in
Wholesale Markets
Overseen by ISO

Automated,
Device-Level
Response to
DLMPs

Full DLMPs to All EndUser Nodes Computed by
DSOs Through DSOCleared Markets; DSO
Coordinates MarketClearing and Service
Provision with ISO

figure 4. An example spectrum of complexity of pricing and market participation. LMP: locational marginal prices;
DLMP: distributed LMP; DSO: distribution system operator.
july/august 2016

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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2016