Exploring Opportunities for Novel Electricity Trading Strategies within a Virtual Power Plant in the European Power Market : New Possibilities in Power Trading Due to the Increased Share of Variable Renewable Energy

Abstract: This report explores the impacts of variable renewable energy (VRE) on power trading in the European wholesale electricity market. The intricate operation of a typical power exchange in Europe is accompanied by an equally complex balancing system. The increasing amount of VRE in the power system, such as wind and solar power, has far-reaching impacts for power traders in both this electricity market and the corresponding balancing system. As a result, the electricity market is evolving in unprecedented ways and new participants are entering the playing field to capitalize on the changing dynamics caused by VRE generators. One novel participant, the virtual power plant (VPP), possesses an advantage over other market participants by aggregating VRE generators with controllable renewable energy generators, like biogas and hydro plants, into one entity. This allows the VPP to both gain access to live VRE production data that larger plants don’t have, which it then utilizes to remotely dispatch various subpools of assets, and to provide balancing services to the grid. Subsequently, VPPs are able to trade VRE and other renewable electricity superiorly on the same spot markets and balancing systems as large central power plants and industrial consumers. The report asserts that VPP traders can earn profits through means of innovative trading strategies that exploit predictable market impacts caused by VRE power through a robust understanding of the electricity market and their unique access to data.