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Congestion management in a smart grid via shadow prices

Abstract We consider a distribution grid interconnecting a number of consumers with flexible power consumption. Each consumer is under the jurisdiction of exactly one balancing responsible party (BRP), who buys energy at a day-ahead electricity market on behalf of the consumer. We illustrate how BRPs can utilize the flexibility of the consumers to minimize the imbalance between the consumed and the purchased energy thereby avoiding trading balancing energy at unfavorable prices. Further we show how shadow prices on the distribution lines can be used to resolve grid congestion without information sharing between the BRPs.