Dynamic Flexibility Requests in Local Flexibility Markets: Quantifying the DSO Willingness to Pay

Abstract

Local Flexibility Markets (LFMs) require Distribution System Operators (DSOs) to determine both the quantity of flexibility to procure and the corresponding willingness to pay during market clearing. Existing approaches typically rely on unrealistic centralized AC-OPF clearing algorithms or strictly localized, static flexibility requests driven primarily by congestion management, while the economic value of flexibility is largely neglected. This paper proposes a dynamic flexibility-request methodology in which the DSO's willingness to pay is embedded directly into the market-clearing objective by monetizing transformer and cable aging, network losses, and voltage congestion. To enable computationally efficient clearing, exact convex piecewise-linear epigraph reformulations of the IEEE C57.91 transformer aging model and an Arrhenius-based cable aging model are developed and formally proven to preserve exactness. The proposed framework is validated on a modified CIGRE MV benchmark and compared with a recent state-of-the-art flexibility-request methodology. The results demonstrate significantly higher market liquidity, more efficient flexibility procurement, and improved network operations while preserving the market's transparency and non-discrimination principles.