# VPP Participation in the FCR Cooperation Considering Opportunity Costs
## 1 Introduction
### Motivation, Literature Review, and Paper Organization  
As previously mentioned, eventually Portugal and Spain may consider joining the FCR Cooperation. The present study was motivated by the following:  
* Potential BSPs are interested in assessing the order of magnitude of revenues. This is currently not known because the FCR in Portugal and Spain is mandatory and not remunerated. BSPs will be able to assess how much this market is _potentially_ worth.
* A VPP including HEs and wind and solar plants is a particular case of the previous point and this study adopted this point of view.
* Assessment of opportunity costs of the VPP have to be taken into account.  
The identified literature gap is now briefly outlined. From the broader to the most concrete, the main topics of interest for the present study were (1) the economic analysis of ancillary services provision by DERs; (2) the context of the FCR Cooperation; (3) focusing aggregation via VPPs; and, especially, (4) the participation of HEs. Although all these topics were previously addressed separately, it was found that no study covered them all.  
Topic (1) consists of a vast and growing body of work: the interested reader is directed to the review presented in [11], which classified over 60,000 works about ancillary services provision by DERs, and concluded that around one fifth of the recent studies addressed scheduling, particularly bidding strategies on balancing markets. However, the particular market of topic (2) is much less covered; an example would be [12], where electric vehicles FCR provision is analyzed from a policy-making perspective; this paper also covers topic (3) as it deals with aggregation. Still on topic (3) but from a more technical perspective, [2] addressed the prequalification process of aggregation. The participation of VPPs in the FCR Cooperation is already a reality: NextKraftwerke claims to be the largest VPP operating in Europe and participates in this market [13].  
Covering topics (1) and (4), [8] proposed a techno-economic analysis for FCR provision in Belgium using a 25 MW HE. Regarding these topics, this paper is the literature case that comes closer to the aims of the present paper. The authors [8] used a dynamic model for the HE, where the HE power consumption depends on the grid frequency. However, the opportunity costs implied in the participation of HEs in the FCR market were not analyzed in this study since they are implicit in the results. Another difference between this and the present paper is the fact that in [8], the HEs consumed electricity procured in the energy market, whereas the present study assumed that power purchase agreements were used. Furthermore, [8] used the Belgian case with four distinct FCR products, whereas the present study proposed the context of FCR Cooperation, which is a simpler market with a single product. Finally, no aggregation via VPP was proposed in [8]. The present work expanded on a previous study of the authors [14], which covered topics (1) to (4), but did not include opportunity costs in the analysis.  
The remainder of this paper is organized as follows: Section 2 details the methodology used, Section 3 presents the results, Section 4 discusses the results, and Section 5 draws conclusions.