# Energy Management of Virtual Power Plant Considering Distributed Generation Sizing and Pricing
## 1 Introduction  
For the first time, the concept of virtual power plant was presented in 1994, with the aims of distributed energy resources (DERs) observation, providing suitable interface for local components, activation of distributed control strategies, and optimal use of available capacity. In the distributed generation (DG) units, the load response and energy storage systems (ESSs) which are used as the unit entity, are called the 'virtual power plant' (VPP). According to the advantages of distributed generation resources and ESSs, a VPP can be an appropriate alternative for conventional fossil fuels. The need for modifying, changing, and displacing of energy consumption provides an efficient atmosphere to implement the VPPs [1; 2]. Therefore, a VPP can be defined as a cluster of dispersed generating units, flexible loads, and storage systems that are grouped in order to operate as a single entity. The generating units in the VPP can employ both fossil and renewable energy sources. Energy management is a common and widely spread concept, including all measures that are planned and implemented to ensure the minimum amount of energy consumed in different activities. Trading, industries, and organizations have found themselves under high economic and environmental pressure in the last two decades to minimize their consumptions. Economic competition in the world market (especially the electricity market) and increasing the state of environmental regulations and standards in order to reduce climate pollutants are the most important factors in investment costs and exploitation of all organizations [3]. Actually, energy management is an important instrument in assisting various institutions to reduce their costs in order to meet these essential goals to survive and succeed in long term. The energy management of the VPPs faces challenges that make it complicated. These challenges include uncertainty in production, consumption, energy prices, and availability of network components. The smart grid increases the ability of the energy management system in the fields of overcoming uncertainties, aggregation of renewable sources, load responsiveness, monitoring, and network control [4; 5]. In [6], a pricing model for the electricity market of the previous day and the regulated market are proposed to maximize the expected profits of the VPP utilization, while the pricing problem is modeled as a two-stage stochastic program. In [7], a two-stage refinement optimization strategy has been proposed for pricing the VPP in day ahead and real time. The practicality of the decisions made and the operation of intelligent network infrastructure to overcome uncertainties are prominent features of this approach. With regard to the definition of a VPP, the energy management can be divided into two categories: smart home power management and smart grid energy management. Most of the work done in the field of smart home energy management has focused on the concept of load responsiveness in energy management to provide a timetable for the use of tools inside the building [8; 9; 10; 11]. In the area of smart grids, due to the influence of DERs, the use of ESSs and responsive loads has been considered in order to manage the variable nature of renewable energy sources (RESs). In [12], an intelligent house energy management model is presented using integrated integer linear programming (LP) to reduce costs and pollution, which can be used in the real-time planning framework, components of a smart home including smart devices, storage systems, and distributed generations. In [13], home-consumer planning has a photovoltaic system without using a storage system under different pricing policies. An algorithm for energy management has been formulated based on linear programming approach in which the solar source uncertainty is modeled with respect to the forecasting points. In [14], the problem of the voltage profile optimization in a distribution system including distributed energy resources has been investigated.