IEEE Power & Energy Magazine - July/August 2021 - 53

Setting the length of the intervals, the length of the horizon, and
how often operating envelopes are calculated have associated
tradeoffs between accuracy and complexity.
Currently, a common solution to mitigate excessive
power flows is a region-wide, fixed export limit at customer
connection points (e.g., the 5-kW limit for single-phase connections
in Australia). However, such a fixed limit can be
overly prohibitive (as it is determined based on worst-case
scenarios) and/or inadequate (as it can become outdated when
DER penetration grows). To this end, an alternative approach
called operating envelopes can become a more effective and
efficient way to facilitate bottom-up system-level market
participation and provision of grid services from the edge
of the grid.
In this concept, distribution companies first calculate,
time or day ahead, operating envelopes (timein
real
varying export or import limits) at the connection point
of the customers' premises (where the meter is located).
This information is then given to aggregators to consider
as a constraint when deciding how to manage their DER
portfolio for energy and ancillary services participation.
Furthermore, local market and pricing mechanisms are
envisioned to be managed by the distribution company,
which could price network-related constraints and services
in an integrated manner with wholesale energy and ancillary
services.
A key advantage of the operating envelope approach is
that it allows the distribution companies to ensure network
integrity without having direct control of the DERs or the
aggregator. This also enables maximization of the capacity
that can be allocated in near real time to different DERs, thus
maximizing the volume of flexibility that can be provided
upstream. Moreover, the development of network-aware
local services that are integrated with wholesale markets
can increase the overall market efficiency across different
" products " and the electricity value chain. This allows
aggregators to improve their business case by co-optimizing
their bids across multiple markets and increase profits for
their customers.
This article provides foundational insights on what
operating envelopes are and how they can facilitate the
provision of flexibility and grid services and relevant market
participation for DER aggregations. We discuss how
operating envelopes could be practically implemented by
industry, including an overall architecture and an example
methodology for determining operating envelopes. We
also look at the role of reactive power to access network
capacity for provision of flexibility, the impact of flexibility
temporal aspects on market interaction, and the
july/august 2021
potential challenges that need to be overcome to make
operating envelopes a reality.
Integrating Local and System-Level
Network and Market Services
Traditionally, energy and ancillary services are acquired
from resources within the transmission network, and
the interactions between the transmission and distribution
networks have been straightforward. Local network
support in the distribution network is typically provided
through the network assets owned by the distribution companies.
Consequently, as the opportunity for residential
DERs to provide both system-level services and local network
support emerges, a new architecture is also necessary
to enable these interactions across the entire power system.
Under this new paradigm, three key roles are envisaged to
enable and facilitate the emerging activities from the edge
of the grid (e.g., aggregation of residential DERs):
✔ the distribution system operator (DSO)
✔ the distribution market operator (DMO, which in
some jurisdictions might be associated with the DSO
in different ways)
✔ the aggregator.
The DSO is the evolutionary form of a distribution company,
an entity now also responsible for actively managing
network access limits of active customers by calculating and
issuing operating envelopes. The aggregator is responsible
for managing the DERs of active customers to participate
in wholesale markets, including ensuring their availability
when services are needed, making bids in the relevant markets,
and sending final dispatch signals to each of the active
customers. There can be multiple aggregators participating
in the market in the same region. Lastly, the DMO is responsible
for clearing the local market and carrying out a financial
settlement with the aggregators while simultaneously
interacting with the bulk energy system and markets.
In addition to the three key roles, a distribution market
platform is also required as a central transaction hub
to facilitate the interactions among all participants in the
day-to-day operations. This central hub enables a more
transparent approach for the parties involved, which can
be particularly important when there are multiple aggregators.
An infographic summarizing the interactions among
participants in the distribution market platform and the
key activities under the proposed architecture is shown
in Figure 1.
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IEEE Power & Energy Magazine - July/August 2021

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