Distributed energy systems (DESs) exhibit potential to promote the energy market reform worldwide. In this study, a bi-level optimization model is proposed to analyze the operation of a DES that purchases high-voltage electricity and natural gas from utility companies, and supplies low-voltage electricity and heat to multiple users. To simplify the resolution process, the bi-level optimization is transformed into a single-level mixed integer linear programming model using the Karush-Kuhn-Tucker approach and Big M method. The results indicate that (i) the time-sensitive energy prices offered by the DES could smoothen the load profiles of users; and (ii) the tiered pricing scheme set up by the utility companies could maximize the utility of the ESS integrated into the DES, but the capacity of the ESS should be accurately designed to fit the corresponding pricing scheme.
Keywords bi-level optimization, distributed energy system, Karush-Kuhn-Tucker condition, demand response, tiered pricing