The Activation of Congestion Service Contracts for Budget-Constrained Congestion Management

Several European distribution system operators (DSOs) are currently grappling with network congestion. New Dutch grid codes have specified two novel bilateral contracts for flexibility procurement from congestion service providers (CSPs), and a budget DSOs can spend on these contracts together. This paper provides the first formalization of these capacity restriction contracts (CRCs) and redispatch contracts (RCs) and presents an optimization model to guide DSOs in allocating a budget between these contracts. In the model, the contracts are activated sequentially by solving two linked (mixed-integer) second-order cone programming problems, where the first is a bi-level leader-followers game between the DSO and CSPs. Applying the model to a Dutch low-voltage network shows that adopting a mix of the two instruments is most cost-effective. It was also shown that if contracted parameters are not chosen properly, the national day-ahead and intra-day market prices can significantly impact the DSOs ability to apply congestion management.