Optimal Offering Strategy of a Virtual Power Plant: A Stochastic Bi-Level Approach

This paper addresses the optimal bidding strategy problem of a commercial virtual power plant (CVPP), which comprises of distributed energy resources (DERs), battery storage systems (BSS), and electricity consumers, and participates in the day-ahead (DA) electricity market. The ultimate goal of the CVPP is the maximization of the DA profit in conjunction with the minimization of the anticipated real-time production and the consumption of imbalance charges. A three-stage stochastic bi-level optimization model is formulated, where the uncertainty lies in the DA CVPP DER production and load consumption, as well as in the rivals' offer curves and real-time balancing prices. Demand response schemes are also incorporated into the virtual power plant (VPP) portfolio. The proposed bi-level model consists of an upper level that represents the VPP profit maximization problem and a lower level that represents the independent system operator (ISO) DA market-clearing problem. This bi-level optimization problem is converted into a mixed-integer linear programing model using the Karush-Kuhn-Tucker optimality conditions and the strong duality theory. Finally, the risk associated with the VPP profit variability is explicitly taken into account through the incorporation of the conditional value-at-risk metric. Simulations on the Greek power system demonstrate the applicability and effectiveness of the proposed model.