A Bilevel Model to Study Inc-Dec Games at the TSO-DSO Interface

Distribution System Operators (DSOs) in Europe increasingly employ flexibility markets to manage overloaded grid lines or transformers. One of the main concerns is that grid users will use these flexibility markets to deliberately create and solve congestion, also known as inc-dec gaming. However, the relevance of this game has not yet been explored for distribution grids. We propose a bilevel model with a three-stage electricity market to examine the inc-dec game in flexibility markets at distribution level and redispatch markets at transmission level. We show that the proposed model can be formulated as a Mathematical Program with Equilibrium Constraints (MPEC) and converted into a Mixed-Integer Linear Program (MILP). We demonstrate the model using a stylized example of renewable energy curtailment due to limited capacity at the transmission and distribution network interface, which is a typical congestion situation in Europe. In our test case, the results show that strategic agents can game flexibility markets. We also find examples of the price-setter game and the inc-dec games using redispatch markets. We compare the characteristics of these games with the existing literature to help regulators and system operators to detect them in practice.