Load Balancing in the Smart Grid: A Package Auction and Compact Bidding Language

Distribution system operators (DSOs) are faced with new challenges from the continuous integration of fluctuating renewable energy resources and new dynamic customer loads such as electric vehicles, into the power grid. To ensure continuous balancing of supply and demand, we propose procurement package auctions to allocate load flexibility from aggregators and customers. The contributions of this research are an incentive-compatible load flexibility auction along with a compact bidding language. It allows bidders to express minimum and maximum amounts of flexibility along with unit prices in single bids for varying time periods. We perform a simulation-based evaluation and assess costs and benefits for DSOs and balancing suppliers given scenarios of varying complexity as well as computational aspects of the auction. Our initial findings provide evidence that load flexibility auctions can reduce DSO costs substantially and that procurement package auctions are well-suited to address the grid load balancing problem.