Emerging smart-grid-enabling technologies will allow an unprecedented degree of observability and control at all levels in a power system. Combined with flexible demand and storage, they could allow procuring energy at minimum cost and environmental impact. That however presupposes real-time coordination of demand of individual households and industries down at the distribution level, with generation at the transmission level. This is closely related with the balancing market economic dispatch (ED) problem, which currently does not take into account distribution network constraints and flexible demand characteristics. Still, assuming a suitably modified form of that problem was available, due to both computational and communications requirements, its centralized solution in its full detail would not be tractable. While there is currently a wealth of literature dealing with distributed optimization applications in power systems, it typically focuses on smaller parts of the overall energy management problem (e.g. transmission area synchronization or electric vehicles management) often without considering its full scale or establishing any association with energy market mechanisms. The target of this paper is twofold: identify a flexible demand and distribution network inclusive formulation for ED; and propose a solution method.
