Market-based TSO-DSO coordination for enhanced flexibility services provision

•The DSO participates in the balancing market as a balance responsible party.•DSO scheduled actions are reflected on TSO balancing market clearing results.•Flexibility resources provide flexibility at distribution and/or transmission level.•Pan-European market-based coordination at distribution and transmission level.•Aligned operation of flexibility markets at distribution and transmission level. This paper proposes a framework for DSO-TSO market-based coordination in a feasible and transparent way, compatible with the European-type electricity market. The DSO participates in the balancing market as a Balance Responsible Party, by submitting price-taking offers that represent the net outcome of DSO scheduled actions at the distribution level. With this approach, the balancing market clearing results reflect the impact of scheduled actions at distribution level on system power balance. In addition, specific design aspects of the DSO market are highlighted that could align DSO and TSO market, increasing the market coordination efficiency and promoting the wider participation of distributed energy resources in both markets. The advantages of the proposed method are: (a) more accurate balancing market pricing signals while congestion management services and balancing services remain decoupled, (b) low data exchange requirements between the two Operators, (c) distributed energy resources opportunity to participate efficiently either in one or both markets, and finally (d) easy pan-European market-based coordination of TSOs-DSOs based on current balancing market development action plans.