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With the emergence of virtual power plants (VPPs) in distribution systems, distribution companies (DISCOs) can manage distributed generators scattered across their systems. Interactions between each DISCO and VPP are expected to be crucial for securing system reliability without increasing operational complexity. This article proposes a bi-level scheduling model for these interactions, considering the ramping flexibility of the distribution system. In the upper level, the DISCO minimizes the distribution system&#x2019;s operational cost and the cost of procuring flexibility by varying the price of the power traded with the VPP. In the lower level, the VPP maximizes its profit by managing the amount of power it trades with the DISCO. We transform the bi-level model into a single-level problem by using Karush&#x2013;Kuhn&#x2013;Tucker optimality conditions and linearization techniques. We present case studies of interactions between the DISCO and VPPs, with the assumption that the DISCO can purchase active power from a wholesale market. The results demonstrate that a win&#x2013;win situation for both the DISCO and VPP can be achieved by managing the power exchanged while procuring flexibility.

A Bi-Level Scheduling Model of the Distribution System With a Distribution Company and Virtual Power Plants Considering Grid Flexibility