A Risk-aware Bi-level Bidding Strategy for Virtual Power Plant with Power-to-Hydrogen System

TL;DR

This work addresses revenue risk in VPPs amid renewable variability and market volatility by embedding Conditional Value at Risk ($CVaR$) into a bi-level bidding framework that coordinates PV, WT, ESS, and a Power-to-Hydrogen (P2H) system. The upper-level optimizes bids to maximize expected revenue while hedging extreme losses through a CVaR term weighted by $eta$, and the lower-level enforces market-clearing via a DC power-flow-based optimization, with an equivalent MPEC reformulation using KKT conditions. Case studies on a modified IEEE 14-bus system show that P2H not only boosts revenue compared with conventional ESS but also provides stronger financial hedging under volatility, particularly when supported by appropriate risk aversion. The results highlight the strategic value of hydrogen storage in VPP operations and suggest that future work on real-time dynamics and hydrogen markets can further enhance profitability and resilience under uncertain market conditions.

Abstract

This paper presents a risk-aware bi-level bidding strategy for Virtual Power Plant (VPP) that integrates Power-to-Hydrogen (P2H) system, addressing the challenges posed by renewable energy variability and market volatility. By incorporating Conditional Value at Risk (CVaR) within the bi-level optimization framework, the proposed strategy enables VPPs to mitigate financial risks associated with uncertain market conditions. The upper-level problem seeks to maximize revenue through optimal bidding, while the lower-level problem ensures market-clearing compliance. The integration of the P2H system allows surplus renewable energy to be stored as hydrogen, which is utilized as an energy carrier, thereby increasing market profitability and enhancing resilience against financial risks. The effectiveness of the proposed strategy is validated through a modified IEEE 14 bus system, demonstrating that the inclusion of the P2H system and CVaR-based risk aversion enhances both revenue and financial hedging capability under volatile market conditions.This paper underscores the strategic role of hydrogen storage in VPP operations, contributing to supporting improved profitability and the efficacy of a risk-aware bidding strategy.

Figures (5)

• Figure 1: Framework of the Proposed Model
• Figure 2: The generation forecasts of PV, WT for each scenario $s$. The probability of scenario $\omega_{s=1,\dots,5} = \{0.3, 0.25, 0.2, 0.15, 0.1 \}.$
• Figure 3: Comparison of ESS and HSS operation. (a) Operation of charging and discharging in ESS (b) SoC of ESS (c) Operation of electrolyzer and fuel cell in HSS (d) SoC of HSS.
• Figure 4: Effect of $\beta$ on revenue across different storage sizes.
• Figure 5: Effect of $\beta$ on revenue for different realized scenarios.