A Design and Benchmarking Framework for Local Flexibility Markets in Active Power Systems

Abstract

Local Flexibility Markets (LFMs) are emerging as a promising mechanism for utilizing Distributed Energy Resources (DERs) to support both transmission and distribution system operation. However, existing studies mainly focus either on conceptual discussions or on isolated market implementations, limiting the ability to systematically compare different architectures. This paper presents a unified design-decision framework for LFMs that, through a structured synthesis of the literature, organizes dominant market structures according to key operator choices, including flexibility scope, coordination mechanisms, bidding structures, and TSO–DSO interaction schemes. Based on this framework, representative LFM architectures are then quantitatively benchmarked under common modeling assumptions and shared network conditions. A combined transmission-distribution test system based on the IEEE 9-bus transmission network and multiple IEEE-33 distribution feeders is used for the assessment. Results demonstrate that the selected market architecture significantly affects congestion management capability, flexibility utilization, operational security, and total operating cost. In particular, architectures that neglect distribution network constraints may reduce operational costs but can lead to insecure DN operation, whereas coordinated sequential frameworks offer a more balanced trade-off between economic efficiency and secure network operation. The proposed framework provides a structured, implementation-oriented methodology for both organizing LFM design choices and benchmarking alternative architectures under consistent assumptions.