In this paper, we develop an economic mechanism for the DSO to exploit the flexibility of the LEM and integrate it into the techno-economic framework for coordinated procurement of DF supported by the novel active network technologies, in this case SOPs. The LEM flexibility mechanism independently clears the LEM, while respecting the network constraints and optimizing network operation cost by leveraging it with the social welfare of the LEM participants. The coordinated procurement framework is based on the bi-level programming approach, where the lower level ensures unconditional clearing of the LEM bids and offers, while the upper level minimizes network operational cost, subject to network constraints and DF originating from all three types of flexibility (i.e., network, contracted, and LEM). Both, the mechanism and the framework can be applied by the DSO to ensure secure and economic network operation while facilitating LEM clearing in the independent manner. In the numerical study, the framework has been applied to IEEE 33-bus benchmark system, where we investigate the performance of the coordination method proposed, evaluate the value of the LEM flexibility mechanism to the DSO, and the value of the novel active network technology (i.e., SOP). Using realistic flexibility demand and supply data, the numerical study showed that the optimal utilization of network and LEM flexibilities can lead to the DSO contracted flexibility service to become unnecessary. While the estimated value of coordinated procurement of the LEM and DSO contracted flexibilities accounts for 26.6% of the network operation cost, technology supported procurement of the LEM flexibility only can reduce the original network operation cost almost twice (by 48.9%).

This paper proposes a framework to model market-driven operational scenarios of distribution systems that comprise multiple stakeholders and flexibility products. The framework exploits an iterative algorithm and optimization procedures to perform flexibility demand-supply modelling, market clearing, ancillary service tendering, and network modelling in a coordinated manner. The proposed framework has been applied to a realistic case study that comprises a real distribution network in England, official forecast data for flexible demand (i.e., heat pumps, electric vehicles, industrial and commercial demand-side response) and distributed generation (i.e., photovoltaics, wind and storage). To envisage competition at the whole system level, the market prices for the main electricity system services (i.e., frequency response and operating reserve) have been informed from a whole energy system modelling. The numerical study showed that market-driven distribution systems can facilitate cost-effective operation of the whole electricity system, delivering value to all main stakeholders, including network customers, suppliers, distributed generators, aggregators, distribution and electricity system operators. However, a comprehensive modelling of a complex ecosystem offered in the present paper, is necessary to find the efficient configuration of a distribution system, including a set of flexibility products, rules, price signals (i.e., tariffs and charges), and coordination between stakeholders.