Power Reserve Capacity from Virtual Power Plants with Reliability and Cost Guarantees

Abstract: The growing penetration of renewable energy sources is expected to drive higher demand for power reserve ancillary services (AS). One solution is to increase the supply by integrating distributed energy resources (DERs) into the AS market through virtual power plants (VPPs). Several methods have been developed to assess the potential of VPPs to provide services. However, the existing approaches fail to account for AS products' requirements (reliability and technical specifications) and to provide accurate cost estimations. Here, we propose a new method to assess VPPs' potential to deliver power reserve capacity products under forecasting uncertainty. First, the maximum feasible reserve quantity is determined using a novel formulation of subset simulation for efficient uncertainty quantification. Second, the supply curve is characterized by considering explicit and opportunity costs. The method is applied to a VPP based on a representative Swiss low-voltage network with a diversified DER portfolio. We find that VPPs can reliably offer reserve products and that opportunity costs drive product pricing. Additionally, we show that the product's requirements strongly impact the reserve capacity provision capability. This approach aims to support VPP managers in developing market strategies and policymakers in designing DER-focused AS products.