Reactive Power Services for Local Flexibility Markets: Technical Drivers and the Proposed Regulatory Framework within MiNDFlex

The increasing penetration of Distributed Energy Resources (DERs) and the widespread undergrounding of MV lines are significantly modifying Reactive Power Flows (RPFs) in urban distribution systems. In Italy, this has led to a substantial rise of capacitive RPFs toward the transmission grid, prompting new regulatory responsibilities for Distribution System Operators (DSOs). This paper assesses the potential of DER-based reactive power regulation to mitigate RPFs and improve voltage profiles in a real MV network in Milan. In MATLAB, DER capability limits are modeled according to the Italian grid codes, considering both over- and under-excitation limits. Simulation results show positive effects of DER regulation, which can significantly affect voltage profiles and reduce capacitive exchanges at the HV/MV interface. Driven by these results, Milan's DSO (Unareti) recently introduced a framework to integrate market-based reactive flexibility services into its MiNDFlex pilot project.