A semi-uniform pricing method for VPPs in electricity markets based on power-reserve flexibility regions

Abstract

Virtual power plants (VPPs) have emerged as an efficient way to utilize distributed energy resources (DERs) at the distribution level. To capture advantages offered by this approach, this paper proposes a complete and effective mechanism for VPPs in electricity markets including the VPP's aggregation and the DSO's clearing and pricing. The nodal power and reserve flexibility of VPPs consisting of typical DERs is presented by a generalized storage model whose disaggregated feasibility is guaranteed by a bound shrinking algorithm. Then VPPs submit nodal flexibility regions and estimated cost functions to the DSO without the leakage of DERs’ privacy or the knowledge about the network topology. In addition, we propose a general energy–reserve co-operation model for distribution system operator (DSO) to clear bids from VPPs. Based on the proposed model, a semi-uniform pricing approach, is developed for energy and reserve contributions by VPPs. Compared to uniform pricing mechanisms, this pricing includes nonuniform shadow prices of VPPs’ individual ramping and SOC constraints, thereby removing the requirement of out-of-market uplifts and ensuring several essential properties, such as truthful bidding incentives and cost recovery for VPPs. Simulations verify the effectiveness of proposed methods compared to their counterparts.