Abstract: With the depletion of fossil energy and its pollution to the environment， the environmentally-friendly distributed generation has been widely adopted. However， large-scale integration of distributed energy resources （DERs） may cause power quality problems and influence the reliable operation of power grids. The emergence of virtual power plant （VPP） effectively solves these challenges. By coordinating and optimizing DERs， a VPP can alleviate the impact of plug-and-play DERs on the bulk power grid； thereby improve the security of power grids. However， research on the coordination between VPPs and power grids still needs further investigation. Therefore， we propose a market equilibrium method in this paper， which enables an iterative coordination between VPPs and the bulk power grid until converged. First， we analyze the definition of VPP and DERs. Then， the optimal coordination between VPPs and the bulk power grid is formulated as a market equilibrium problem. A two-level mathematical model is proposed. The objectives of both VPP-level and power grid-level models are to minimize the operation costs， respecting the constraints for DERs and transmission networks. An iterative solution algorithm is designed to efficiently solve such a problem. Case studies demonstrate that the proposed model and method can effectively reduce the complexity of coordination between VPPs and the bulk power grid while considering the corresponding impacts， thus reducing the total operation costs and improving the economic level of the entire power system.

Key words: distributed energy resource, virtual power plant, market equilibrium, electricity market