Logo
ScienceStack
Table of Contents
Fetching ...
Sign In

Wholesale Market Participation via Competitive DER Aggregation

Cong Chen, Ahmed S. Alahmed, Timothy D. Mount, Lang Tong

TL;DR

The paper tackles the challenge of profit-maximizing DER aggregation that participates directly in wholesale markets while remaining competitive with regulated retail tariffs. It develops a convex, closed-form framework for a competitive DER aggregator (DERA) that directly controls aggregated DERs under distribution network access limits, derives virtual-storage bid/offer curves for wholesale participation, and proves that welfare with DERA participation matches that of direct prosumer participation. A separable DERA benefit function for network access is introduced and used to study long-run equilibrium among multiple DERAs. Extensive numerical experiments compare competitive DER aggregation with NEM and GAB, demonstrating superior welfare and the conditions under which multiple DERAs can survive in long-run equilibrium, with clear practical implications for DSO coordination and market design.

Abstract

We consider the aggregation of distributed energy resources (DERs), such as solar PV, energy storage, and flexible loads, by a profit-seeking aggregator participating directly in the wholesale market under distribution network access constraints. We propose a competitive DER aggregator (DERA) model that directly controls local DERs to maximize its profits, while ensuring each aggregated customer gains a surplus higher than their surplus under the regulated retail tariff. The DERA participates in the wholesale electricity market as virtual storage with optimized generation offers and consumption bids derived from the propoed competitive aggregation model. Also derived are DERA's bid curves for the distribution network access and DERA's profitability when competing with the regulated retail tariff. We show that, with the same distribution network access, the proposed DERA's wholesale market participation achieves the same welfare-maximizing outcome as when its customers participate directly in the wholesale market. Extensive numerical studies compare the proposed DERA with existing methods in terms of customer surplus and DERA profit. We empirically evaluate how many DERAs can survive in the competition at long-run equilibrium, and assess the impacts of DER adoption levels and distribution network access on short-run operations.

Wholesale Market Participation via Competitive DER Aggregation

TL;DR

The paper tackles the challenge of profit-maximizing DER aggregation that participates directly in wholesale markets while remaining competitive with regulated retail tariffs. It develops a convex, closed-form framework for a competitive DER aggregator (DERA) that directly controls aggregated DERs under distribution network access limits, derives virtual-storage bid/offer curves for wholesale participation, and proves that welfare with DERA participation matches that of direct prosumer participation. A separable DERA benefit function for network access is introduced and used to study long-run equilibrium among multiple DERAs. Extensive numerical experiments compare competitive DER aggregation with NEM and GAB, demonstrating superior welfare and the conditions under which multiple DERAs can survive in long-run equilibrium, with clear practical implications for DSO coordination and market design.

Abstract

We consider the aggregation of distributed energy resources (DERs), such as solar PV, energy storage, and flexible loads, by a profit-seeking aggregator participating directly in the wholesale market under distribution network access constraints. We propose a competitive DER aggregator (DERA) model that directly controls local DERs to maximize its profits, while ensuring each aggregated customer gains a surplus higher than their surplus under the regulated retail tariff. The DERA participates in the wholesale electricity market as virtual storage with optimized generation offers and consumption bids derived from the propoed competitive aggregation model. Also derived are DERA's bid curves for the distribution network access and DERA's profitability when competing with the regulated retail tariff. We show that, with the same distribution network access, the proposed DERA's wholesale market participation achieves the same welfare-maximizing outcome as when its customers participate directly in the wholesale market. Extensive numerical studies compare the proposed DERA with existing methods in terms of customer surplus and DERA profit. We empirically evaluate how many DERAs can survive in the competition at long-run equilibrium, and assess the impacts of DER adoption levels and distribution network access on short-run operations.
Paper Structure (35 sections, 7 theorems, 92 equations, 8 figures, 1 table)

This paper contains 35 sections, 7 theorems, 92 equations, 8 figures, 1 table.

Table of Contents

  1. Introduction
  2. Related Work
  3. Summary of Results, Contributions, and Limitations
  4. Paper Organization and Notations
  5. DER Aggregation Model
  6. Competitive DER Aggregation
  7. Closed-Form Solution for Competitive DER Aggregation
  8. NEM benchmarks
  9. Properties of DERA Competitive with NEM
  10. DERA Wholesale Market Participation
  11. Offer/Bid Curves of DERA in Energy Markets
  12. Market Efficiency with DERA Participation
  13. DERA-DSO coordination
  14. DERA Benefit Function for Distribution Network Access
  15. Long-Run Equilibrium for Competitive DERA
  16. ...and 20 more sections

Key Result

Theorem 1

Given the wholesale market LMP $\pi$, the optimal consumption bundle ${\bm d}^*_n=(d^*_{nk})$ of prosumer $n$ and its payment $\omega_n^*$ are given by where $m$ is the index of PoA connecting customer $n$, i.e., $n \in {\cal N}_m$ defined by eq:N.

Figures (8)

  • Figure 1: DERA model's physical and financial interactions. The red arrows show the bidirectional power flow, the green for the financial transactions, and the blue for direct control signals.
  • Figure 2: Expected surplus distribution and market efficiency with 80% DG adoption rate. Each shaded rectangular is dominated by its top right corner. (From the left to the right, the expected DG increases from 1.1 to 5.1 kW.)
  • Figure 3: Expected surplus distributions v.s. network access ratio. (Top: expected customer surplus; bottom: expected DERA surplus.)
  • Figure 4: Expected surplus distributions v.s. network access ratio with 50% DG adoption rate. (Top: expected customer surplus; bottom: expected DERA surplus when $\mathbb{E}[g]=$ 1.1 kW and 5.1 kW, respectively.)
  • Figure 5: DERA Benefit function $\varphi$. (Left: withdrawal access $-\underline{C}$; right: injection access $\overline{C}$.)
  • ...and 3 more figures

Theorems & Definitions (7)

  • Theorem 1: Optimal DERA scheduling and payment
  • Proposition 1: Average cost of consumption
  • Proposition 2: Profitability of DERA
  • Lemma 1: Wholesale market clearing with DERA
  • Theorem 2: Market efficiency
  • Proposition 3: Benefit function for network access
  • Lemma 2