Risk Analysis on Distributed Energy Resources Participation in a Dayahead electricity Market Operating under a Virtual Power Plant

Distributed Energy Resources (DER) are small, modular, decentralized, grid-connected or off-grid energy systems located in or near the place where energy is used [1]. They are integrated systems that can include effective means of power generation, energy storage, and delivery. DER system application is a very good alternative in improving the power quality and reliability of electricity supply while providing low-cost energy. DER on the other hand is not yet competitive and actively participating in the electricity market due mainly to the high risk of catering to a large market with its much clustered size and a very high uncertainty of availability [2]. They are however passively installed with the intent to serve as a background in the mainstream of electricity distribution network. A possible scenario of a passive approach of DER implementation is shown in figure 1. The basic approach to making DER a forefront player in the electricity market is the aggregation of a number of DER systems into one single profile in a similar manner as that of a transmission-connected generator [3]. This idea known as "virtual power plant" can decrease the risks from operating DER system independently. The VPP profile will be based on the aggregated capacity of its DER portfolio and their individual bid for their sale of energy. The VPP system operator will then bid this aggregated capacity to the day-ahead electricity market. Due to the volatility of the hourly spot price, each DER bids face a risk of not being catered. This study evaluates the profitability and risk of bidding in a day-ahead electricity market of each DER operating under a VPP system. A Monte-Carlo Simulation is conducted to determine the spot price, and the expected profit of DERs. Value at Risk (VaR) and Conditional Value at Risk (CVaR) are used to quantify the risk of the DER bids. The proposed procedure provides DER operators an efficient tool to be able to quantify the risk and handle the uncertainties in participating in a day-ahead electricity market