Analyzing the Role of the DSO in Electricity Trading of VPPs via a Stackelberg Game Model

The increasing penetration of distributed energy resources has sparked interests in participating in power markets. Here, we consider two settings where Virtual Power Plants (VPPs) with some flexible resources participate in the electricity trading, either directly in the wholesale electricity market, or interfaced by the Distribution System Operator (DSO) who is the transaction organizer. In order to study the role of DSO as a stakeholder, a Stackelberg game is represented via a bi-level model: the DSO maximizes profits at the upper level, while the VPPs minimize operating costs at the lower level. To solve this problem, the Karush-Kuhn-Tucker conditions of lower level is deduced to achieve a single-level problem. The results show that the role of the DSO as an intermediary agent leads to a decrease in operating costs of the VPPs by organizing lower-level trading, while making a profit for itself. However, this result comes with interests loss of the wholesale market, implying that stakeholders in the market need to abide by regulatory constraints.