# VPP Participation in the FCR Cooperation Considering Opportunity Costs
## 1 Introduction
### FCR Activation and VPP Participation  
The units participating in the FCR have a local controller that, according to the frequency of the grid, increase or decrease the output of the controlled unit. The basics behind an FCR can be explained using Figure 2 as an example. When the frequency falls below 50 Hz (underfrequency), this means that the load in the system is greater than the generation, hence upward reserve activation (i.e., increase in generation) is required. The opposite is also true and results in downward reserve activation. According to [4], the FCR reserve activation is proportional if the frequency deviation is \(\pm\)200 mHz; when the frequency deviation from 50 Hz is higher than \(\pm\)200 mHz, the full reserve should be activated. Taking this into consideration and using the frequency variation presented in Figure 2, the output of a BSP unit (e.g., a combined cycle gas turbine power plant) reserving 5 MW for an FCR would be the one presented in Figure 3. Since the plant in the example has a maximum capacity of 100 MW, in order to provide 5 MW of upward reserve, this means that at the nominal frequency, the plant can provide a maximum of 95 MW for the energy market, thus reserving 5 MW of _headroom_ for the FCR market. In this case, reserving this _headroom_ for the FCR market means that the plant is _permanently_ missing the opportunity to sell these 5 MW to the energy market. This missed opportunity represents an opportunity cost. Currently, in the FCR Cooperation, only symmetric bids are accepted, meaning that when a bid of, e.g., 5 MW is accepted, the BSP must guarantee that when the FCR is  
Figure 3: Active power response to frequency variation and concept of headroom. Figure 2: Example of a frequency variation and the need for FCR upward and downward activations. activated, it can provide up to 5 MW downward and upward depending on the frequency value. The FCR Cooperation does not remunerate the activated energy; only the accepted power is remunerated. The VPP envisioned in this paper has three components: solar units, wind units, and HEs. The first hybrid power plant in Europe that includes solar and wind farms and will include HEs in the future is presented in [5]. Technically, if the resources are available, it is possible to control the output of all of these units to allow for FCR provision, as shown for wind farms [6], solar units [7], and HEs [8]. Each component of the VPP is capable of both upward and downward reserve provision. The real-world demonstration of both upward and downward FCR provision of a 300 MW solar unit is presented in [9]; instead of operating at an estimated available peak power, the plant reserves 30 MW headroom, like the previous comments about Figure 3 emphasize. Of course, with no headroom, only downward provision will be possible for wind and solar units; on the other hand, with no headroom, an HE can provide only upward reserve. As shown in Figure 3, reserving headroom leads to opportunity costs. The contradiction is the following: reserving headroom allows for FCR provision but also diminishes the potential revenues of a solar unit on the energy market. It should be taken into account that the main purpose of a solar unit is to deliver energy to the grid on the energy market; similarly the HEs take energy from the grid mainly to produce hydrogen that is sold on the hydrogen market. FCR provision should be seen as an additional revenue for these units. The fact that FCR needs to be delivered as a symmetric product encourages the aggregation of solar and wind units that are solely downward providers with HEs that are only upward providers because the headroom is avoided completely for each of the components when they are aggregated. This is the aggregation proposed in this paper, which is done through a virtual power plant (VPP).