IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v352y2023ics0306261923012825.html
   My bibliography  Save this article

Stochastic bidding for VPPs enabled ancillary services: A case study

Author

Listed:
  • Wang, Zheng
  • Li, Chaojie
  • Zhou, Xiaojun
  • Xie, Renyou
  • Li, Xiangyu
  • Dong, Zhaoyang

Abstract

Strategic bidding which aims to optimally harvest the price difference in the wholesale electricity market can efficiently allocate VPPs’ aggregated resources to provide large flexibility for energy and frequency regulation (FR), aiding in the real-time rebalancing of supply and demand. However, the uncertainty of renewable energy results in substantial imbalances between supply and demand, which causes high randomness of system frequency deviation and significant price fluctuations in the electricity market, making bidding challenging. To tackle these issues, a risk-averse optimal bidding strategy is proposed for VPPs to participate in both energy and FR markets. Moreover, a payment recovery mechanism is designed to recover the cost of FR undersupply. Specifically, each VPP submits bids to maximize profit, while the market operator clears the market and penalizes undersupply through the payment recovery mechanism. The existence of Nash equilibrium is proved, and a distributed best response algorithm is implemented to calculate the risk-averse optimal bidding strategy, taking into account Denial-of-Service attacks. The mean-convergence and variance-convergence of our proposed algorithm are derived. A case study of Australian National Electricity Market (NEM) validates the effectiveness of the proposed method in reducing overbidding risk, strengthening FR service reliability and improving profits for VPPs.

Suggested Citation

  • Wang, Zheng & Li, Chaojie & Zhou, Xiaojun & Xie, Renyou & Li, Xiangyu & Dong, Zhaoyang, 2023. "Stochastic bidding for VPPs enabled ancillary services: A case study," Applied Energy, Elsevier, vol. 352(C).
    • Handle: RePEc:eee:appene:v:352:y:2023:i:c:s0306261923012825
    DOI: 10.1016/j.apenergy.2023.121918
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261923012825
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2023.121918?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lin, Wen-Ting & Chen, Guo & Zhou, Xiaojun, 2022. "Distributed carbon-aware energy trading of virtual power plant under denial of service attacks: A passivity-based neurodynamic approach," Energy, Elsevier, vol. 257(C).
    2. Huifu Xu & Dali Zhang, 2013. "Stochastic Nash equilibrium problems: sample average approximation and applications," Computational Optimization and Applications, Springer, vol. 55(3), pages 597-645, July.
    3. Hosseini, Seyyed Ahmad & Toubeau, Jean-François & De Grève, Zacharie & Vallée, François, 2020. "An advanced day-ahead bidding strategy for wind power producers considering confidence level on the real-time reserve provision," Applied Energy, Elsevier, vol. 280(C).
    4. Jinlong Lei & Uday V. Shanbhag & Jong-Shi Pang & Suvrajeet Sen, 2020. "On Synchronous, Asynchronous, and Randomized Best-Response Schemes for Stochastic Nash Games," Mathematics of Operations Research, INFORMS, vol. 45(1), pages 157-190, February.
    5. Rockafellar, R. Tyrrell & Uryasev, Stanislav, 2002. "Conditional value-at-risk for general loss distributions," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1443-1471, July.
    6. Prakash, Abhijith & Bruce, Anna & MacGill, Iain, 2022. "Insights on designing effective and efficient frequency control arrangements from the Australian National Electricity Market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 161(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cui, Xueting & Zhu, Shushang & Sun, Xiaoling & Li, Duan, 2013. "Nonlinear portfolio selection using approximate parametric Value-at-Risk," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 2124-2139.
    2. Dominique Guégan & Wayne Tarrant, 2012. "On the necessity of five risk measures," Annals of Finance, Springer, vol. 8(4), pages 533-552, November.
    3. Rockafellar, R.T. & Royset, J.O., 2010. "On buffered failure probability in design and optimization of structures," Reliability Engineering and System Safety, Elsevier, vol. 95(5), pages 499-510.
    4. Li, Bo & Hou, Peng-Wen & Chen, Ping & Li, Qing-Hua, 2016. "Pricing strategy and coordination in a dual channel supply chain with a risk-averse retailer," International Journal of Production Economics, Elsevier, vol. 178(C), pages 154-168.
    5. Kull, Andreas, 2009. "Sharing Risk – An Economic Perspective," ASTIN Bulletin, Cambridge University Press, vol. 39(2), pages 591-613, November.
    6. Mínguez, R. & Conejo, A.J. & García-Bertrand, R., 2011. "Reliability and decomposition techniques to solve certain class of stochastic programming problems," Reliability Engineering and System Safety, Elsevier, vol. 96(2), pages 314-323.
    7. Jia Liu & Cuixia Li, 2023. "Dynamic Game Analysis on Cooperative Advertising Strategy in a Manufacturer-Led Supply Chain with Risk Aversion," Mathematics, MDPI, vol. 11(3), pages 1-24, January.
    8. Curtis, John & Lynch, Muireann Á. & Zubiate, Laura, 2016. "The impact of the North Atlantic Oscillation on electricity markets: A case study on Ireland," Energy Economics, Elsevier, vol. 58(C), pages 186-198.
    9. Brian Tomlin & Yimin Wang, 2005. "On the Value of Mix Flexibility and Dual Sourcing in Unreliable Newsvendor Networks," Manufacturing & Service Operations Management, INFORMS, vol. 7(1), pages 37-57, June.
    10. Alexander, Gordon J. & Baptista, Alexandre M. & Yan, Shu, 2014. "Bank regulation and international financial stability: A case against the 2006 Basel framework for controlling tail risk in trading books," Journal of International Money and Finance, Elsevier, vol. 43(C), pages 107-130.
    11. D. Kuhn, 2009. "Convergent Bounds for Stochastic Programs with Expected Value Constraints," Journal of Optimization Theory and Applications, Springer, vol. 141(3), pages 597-618, June.
    12. Pengyu Wei & Zuo Quan Xu, 2021. "Dynamic growth-optimum portfolio choice under risk control," Papers 2112.14451, arXiv.org.
    13. Kolos Ágoston, 2012. "CVaR minimization by the SRA algorithm," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 20(4), pages 623-632, December.
    14. Saissi Hassani, Samir & Dionne, Georges, 2021. "The New International Regulation of Market Risk: Roles of VaR and CVaR in Model Validation," Working Papers 21-1, HEC Montreal, Canada Research Chair in Risk Management.
    15. Sarah Kaakai & Anis Matoussi & Achraf Tamtalini, 2022. "Multivariate Optimized Certainty Equivalent Risk Measures and their Numerical Computation," Working Papers hal-03817818, HAL.
    16. Vladimir Rankovic & Mikica Drenovak & Branko Uroševic & Ranko Jelic, 2016. "Mean Univariate-GARCH VaR Portfolio Optimization: Actual Portfolio Approach," CESifo Working Paper Series 5731, CESifo.
    17. Harris, Richard D.F. & Mazibas, Murat, 2013. "Dynamic hedge fund portfolio construction: A semi-parametric approach," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 139-149.
    18. Fermanian, Jean-David & Scaillet, Olivier, 2005. "Sensitivity analysis of VaR and Expected Shortfall for portfolios under netting agreements," Journal of Banking & Finance, Elsevier, vol. 29(4), pages 927-958, April.
    19. Meyer-Aurich, Andreas & Karatay, Yusuf Nadi, 2019. "Effects of uncertainty and farmers' risk aversion on optimal N fertilizer supply in wheat production in Germany," Agricultural Systems, Elsevier, vol. 173(C), pages 130-139.
    20. Maziar Sahamkhadam, 2021. "Dynamic copula-based expectile portfolios," Journal of Asset Management, Palgrave Macmillan, vol. 22(3), pages 209-223, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:352:y:2023:i:c:s0306261923012825. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.