Mechanism Design for Virtual Power Plant with Independent Distributed Generators
AdvisorsShamma, Jeff S.
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AbstractWe discuss a model of a virtual power plant (VPP) that provides market access to privately-owned distributed generations (DGs). The VPP serves passive loads, processes bids from generators, and trades in the wholesale market. The generators can be renewable or thermal, and they act strategically to maximize their own profit. The VPP establishes the rules of the internal market to minimize the cost of energy and the cost of balancing while ensuring generator participation and load balancing. We derive a heuristic mechanism for internal market and propose a dynamic programming approach for minimizing the VPP cost. We present illustrative simulations for both single and multistage market bidding and then compare the resulting performance to the centralized VPP model, where the DGs are assumed to be owned by the VPP. We show that the proposed design incentivizes the DG agents to behave the same as in the centralized case, but the optimal cost paid by VPP is higher due to the payments to the DG owners.