A recent study led by SHU Zhengyu from the College of Electrical Engineering & New Energy at China Three Gorges University has introduced a significant advancement in how virtual power plants (VPPs) can engage in the day-ahead electricity market. This research, published in the journal “Electric Power Engineering Technology,” explores the integration of carbon trading into VPP operations, positioning these entities not merely as price takers but as influential price makers in the market.
VPPs aggregate various energy resources, enabling them to operate as a single unit in electricity and carbon trading markets. As the scale of these plants grows, their potential to impact market dynamics becomes more pronounced. The study proposes a bi-level bidding strategy that utilizes Stackelberg game theory, which recognizes the strategic interactions between the VPP and the electricity market. The upper-level model focuses on maximizing the VPP’s anticipated profits, while the lower-level model aims to minimize the overall system’s clearing costs.
One of the key innovations of this research is the consideration of uncertainty in wind farm output predictions. To address this uncertainty, the authors present two distinct bidding strategies for VPP operators: a risk-averse strategy and an opportunity-seeker strategy, both grounded in information gap decision theory (IGDT). This allows operators to tailor their approach based on their risk tolerance and market conditions.
The findings highlight a notable commercial impact. By implementing strategic bidding decisions that account for carbon trading, the expected revenue for VPPs increased by 5.1% compared to scenarios that did not consider carbon trading. “VPPs can influence market prices through strategic bidding decisions,” said SHU Zhengyu, emphasizing the potential for these entities to enhance their profitability while contributing to carbon reduction efforts.
This research opens up new opportunities for energy sector stakeholders, including VPP operators and energy market participants. By adopting the proposed bidding strategies, VPPs can not only improve their financial performance but also play a pivotal role in shaping market prices and promoting sustainable energy practices. As the energy landscape continues to evolve, the integration of carbon trading into VPP operations represents a forward-thinking approach that aligns economic incentives with environmental goals.
