Virtual Power Plant Auctions

Peter Cramton, University of Maryland
Lawrence M. Ausubel, University of Maryland

Abstract

Since their advent in 2001, virtual power plant (VPP) auctions have been widely implemented. In this paper, we describe the various design choices that virtually all VPP auctions have had in common and also discuss a few aspects of the auction design that have varied significantly among the VPP auctions to date. We then consider whether VPP auctions have been an effective tool for promoting the objectives of regulators. We find that VPP auctions are effective devices for facilitating new entry into electricity markets and for developing wholesale markets, while they are not particularly well suited to making large reductions in market power in the spot market.