Optimal demand response bidding and pricing mechanism in distribution network: Application for a virtual power plant

In this paper, the participation of a virtual power plant (VPP) that contains distributed energy resources (DER) in an electricity market is studied considering distribution network constraints. The DERs include renewable resources, diesel generators, and controllable demands. The virtual power plant operator (VPPO) is assumed to have full controllability and observability of the conventional generators and renewable resources (RES) located within the VPP. The aim is to maximize the VPP's profits by optimizing its bidding strategies into a wholesale energy market. The VPPO trades energy externally with the wholesale market, which is managed by an independent system operator (ISO). Energy is sold to the ISO when the VPP generation exceeds the demand, and it is purchased from the ISO when generation is less than the demand. The VPP also trades the energy internally to supply the loads. A linearized model of the distribution network (DN) is considered to account for network constraints, namely nodal voltages and line flows, within the VPP. For comparison and verification, the proposed model is tested with and without enforcing the DN constraints. Simulation results demonstrate the importance of considering DN constraints for the proper operation of the VPP and their impact on the VPP profits.