Optimal Reliability Thresholds For Stochastic Flexibility Aggregators In European Reserve Markets

The integration of stochastic renewable energy sources has made flexibility aggregators crucial for power system balancing, yet the uncertainty they introduce challenges system security and market efficiency. Current trends show a move towards probabilistic reliability rules for bid qualification, but a key research gap remains: how can a Transmission System Operator (TSO) optimally set these reliability thresholds while considering competitive aggregators in the market? This paper proposes a novel methodology using a Strengthened Faster Linear Approximation (SFLA) to reformulate the game-theoretic problem, which includes lower-level distributionally robust joint chance constraints, into a tractable single-level optimization problem. A case study with real-world data from Spanish Reserve Markets demonstrates the method’s ability to balance system costs and security, quantifying the trade-off between reserve procurement and delivery risk. This research provides TSOs with a computationally tractable decision-making tool to set reliability thresholds for aggregators while ensuring security.