Risk‐Aware Multi‐Market Participation With Transformer Lifetime Preservation in Active Distribution Networks

ABSTRACT

The rapid growth of distributed energy resources is transforming distribution systems into active market participants, enabling distribution system operators to engage in energy, reactive power and reserve trading. However, existing profit‐driven strategies largely neglect the degradation of critical assets, particularly distribution transformers (DTs), whose accelerated ageing can offset short‐term economic gains through long‐term replacement costs and reduced reliability. This paper addresses this gap by proposing a risk‐aware co‐optimisation framework that jointly models multi‐market trading and transformer life management under uncertainty. The problem is formulated as a stochastic mixed‐integer linear programming model, incorporating conditional value at risk to explicitly capture financial risks arising from uncertainties in load demand, renewable generation, market prices and ambient temperature. To preserve computational efficiency while maintaining physical accuracy, nonlinear AC power flow and IEEE standard‐based thermal ageing models are reformulated using piecewise linearisation and McCormick envelope techniques. The proposed approach is validated on a modified IEEE 33‐bus distribution system, demonstrating that integrating DT degradation into operational decision‐making entails a marginal daily profit reduction of only 6.9%, while significantly extending transformer lifetime. Crucially, the co‐optimisation strategy reveals a strong synergy between asset preservation and system efficiency. By strategically reallocating trading from the energy market to the reserve market, the proposed framework reduces active power losses by 40.4% and average voltage deviations by 70%, proving that long‐term asset management can be achieved without compromising and indeed enhancing network performance.