Long-Term Economic Analysis of an ESS Leasing-Based Virtual Power Plant Business Model for Participation in Renewable Energy Bidding Markets

Virtual power plant (VPP) operators participate in renewable energy bidding markets by forecasting renewable generation and submitting bids based on these forecasts. As allowable forecast-error ranges have recently been tightened to improve the reliability of renewable energy resources, VPP operators face increasing imbalance penalty (IBP) costs. Energy storage systems (ESSs) can mitigate IBP costs by storing surplus generation that is not cleared in the market and selling it later. However, the high upfront cost of ESSs entails considerable financial risk and may create a significant barrier to entry for VPP operators. Therefore, this study evaluates the long-term economic feasibility of an ESS leasing-based business model involving renewable energy generators, an ESS leasing provider, and a VPP operator participating in a renewable energy bidding market. A VPP operating revenue model incorporating metered energy payments, capacity payments, and IBPs was developed, and a one-year operational simulation was conducted. The resulting costs and benefits were subsequently evaluated over the project lifetime.