# VPP Participation in the FCR Cooperation Considering Opportunity Costs
## 5 Conclusions  
This study investigated the integration of Portugal and Spain in the existing FCR cooperation and answered the following question: what would be the revenues of a VPP aggregating wind and solar units along with HEs in this market? In responding to this inquiry, the applied methodology facilitated the computation of the bid size of the VPP while accounting for opportunity costs. The VPP optimally reduced its opportunity costs by strategically combining units that provided downward reserve (wind, solar) with units that provide upward reserve (HEs), thus avoiding the need to reserve headroom. The results show that the opportunity costs were higher than possible revenues in some market sessions, and thus, the VPP refrained from participating in such sessions. The model relied on actual market outcomes from the Frequency Containment Reserve (FCR) Cooperation and verified data on renewable energy generation during the period 2020-2022. In this study, it was assumed that each country was in a state of balance (not importing nor exporting), meaning it did not encounter constraints within the FCR Cooperation, and consequently, maintained the LMPs equal to the CBMPs. A prior analysis of the evolution of CBMPs showed that prices have increased over the years. This means that over the years, the VPP would increase the revenues proportionally. Although, here it was assumed that the CBMPs were known in advance, in reality, they would need to be forecasted. A noteworthy conclusion was that exogenous variables, such as natural gas prices, carbon pricing, and even market strategies employed by BSVs, pose challenges in assessment, rendering the precise computation of future CBMPs complex. Note that the forecasting would take place in the day ahead; it is likely that the natural gas and carbon pricing would be easy to forecast because variations would tend to be minimal in this time frame. More complex would probably be the understanding of market competitors' strategies. This is basically the same forecasting problem that market competitors face in the day-ahead energy market. Three scenarios were formulated to calculate the VPP revenues. For example, even under conservative estimates for HE installation, a Portuguese VPP aggregating 50 MW of HEs and a mere 3% of the existing wind and solar generators, each operating with a 20% reserve margin, could potentially generate annual revenues exceeding EUR 800k (based on the assumed 2022 CBMPs). The work previously published, without opportunity cost consideration, would lead the VPP to participate in 87% of the market sessions (14), whereas its computation (the main gap covered by this study) resulted in market participation dropping to 64%. Taking opportunity costs into account, the HEs in this specific case would receive over EUR 90k. In an alternative scenario, taking into account the projected HE installation targets set by Spain for 2030, along with the forecasted additions of new wind and solar power capacity, the VPP could cover 58% of Spain's FCR requirements and generate revenues circa EUR 31M. This figure needs to be read carefully, as a limitation of this study arose from certain assumptions: the VPP was assumed to participate in the market as a price-taker, and we presumed that the CBMP was pre-determined and unaffected by the bid size of the VPP. In the event that the VPP was to encompass 60% of the FCR, it would transition to a price-maker role, potentially leading to a reduction in the LMP in Spain due to market splitting for a substantial portion of the year. Consequently, this could diminish the profits of the VPP. It is acknowledged that the variables \(VGS_{c}\) and \(RDS_{c}\) utilized in this context can theoretically be elevated, leading to a potential increase in the virtual power plant (VPP) bid size, opportunity costs, and possible heightened degradation of the HE stack.