Offering strategy of a price-maker virtual power plant in energy and reserve markets

Abstract

This paper deals with the offering strategy of a virtual power plant (VPP) that participates in the energy and reserve electricity markets. The VPP under consideration includes diverse electricity assets, such as a flexible demand, a conventional generating unit, a renewable generating unit, and a storage unit. The VPP behaves as a price-maker player and determines its offering decisions one day in advance. The decision-making problem is, therefore, highly influenced by different sources of uncertainties, including the renewable production levels, the up/down reserve request coefficients, and the up/down reserve energy prices, all of which are represented using a number of scenarios. The problem is formulated using a stochastic bi-level model. The objective of the upper-level problem is to maximize the expected profit of the VPP while meeting the technical limitations of the units in the VPP for the realization of each scenario. The lower-level problem represents the clearing of the energy and reserve markets and provides the market prices. The stochastic bi-level model is converted into a mathematical program with equilibrium constraints by replacing the equilibrium solutions of the market clearing problems with their equivalent first-order optimality conditions. The results of a realistic case study verify the performance of the proposed approach and show that the VPP can increase its profit by behaving as a price-maker agent in the energy and reserve markets.