A Bilevel Approach to Operational Decision Making of a Distribution Company in Competitive Environments

This paper presents a model for operational decision making of a distribution company (disco) with distributed generation (DG) and interruptible loads (IL) in a competitive market. The disco objective, modeled through the upper-level problem, is to minimize the cost of market purchases and DG unit dispatch while taking into account the responses of the other discos. This upper-level problem is constrained by a lower-level market clearing problem whose objective corresponds to maximization of social welfare. Such a setting results in a multi-disco equilibrium problem formulated as an equilibrium problem with equilibrium constraints (EPEC) by combining the optimality conditions of all upper-level problems. Using a nonlinear approach, the EPEC problem is reformulated as a single nonlinear optimization model which is simultaneously solved for all discos. The proposed approach is applied to an ac model of a power system to account for voltage and reactive power constraints of the transmission and distribution networks. Numerical examples based on two test systems are presented to illustrate the application of the proposed method.