Iranian Journal of Electrical and Electronic Engineering

By increasing the use of distributed generation (DG) in the distribution network operation, an entity called virtual power plant (VPP) has been introduced to control, dispatch and aggregate the generation of DGs, enabling them to participate either in the electricity market or the distribution network operation. The participation of VPPs in the electricity market has made challenges to fairly allocate payments and benefits between VPPs and distribution network operator (DNO). This paper presents a bilevel scheduling approach to model the energy transaction between VPPs and DNO.  The upper level corresponds to the decision making of VPPs which bid their long- term contract prices so that their own profits are maximized and the lower level represents the DNO decision making to supply electricity demand of the network by minimizing its overall cost. The proposed bilevel scheduling approach is transformed to a single level optimizing problem using its Karush-Kuhn-Tucker (KKT) optimality conditions. Several scenarios are applied to scrutinize the effectiveness and usefulness of the proposed model.