Integrating Behind-the-Meter Grid Edge Technologies Into Wholesale Electricity Markets: A Novel Methodology Using Virtual Power Plants

The massive penetration of distributed energy resources (DERs) and the Internet of Things (IoT) devices in the grid are creating significant opportunities but also pose new challenges to the power system from an operational and market perspective. The key challenges concern the coordination of a very large number of small heterogeneous energy resources at the edge of the grid to enhance the resiliency of the system and their harmonization with grid operations while creating opportunities for the DER aggregators/owners for participating in hierarchical energy market structures. DERs could participate, individually or through aggregations, in the form of virtual power plants (VPPs) behind the meter (BTM) in wholesale energy markets consistent with the landmark Federal Energy Regulatory Commission Order 2222. This article proposes a comprehensive hardware and software methodology for integrating heterogeneous BTM DER smart devices into VPPs for wholesale energy market participation. Specifically, it proposes a methodology for calculating risk-based VPP energy offers via supply functions, designed to maximize the DER value from energy market participation. The supply functions are determined based on off-line sampling of actual DER usage data from actual installations of DER assets.