*3.2. Generators*

An electricity generator is an agen<sup>t</sup> that owns the facilities to convert any type of primary energy into electricity.

The main activity of generators is to produce the electricity that is used by consumers. Moreover, generators have the capability to provide operation services (OSs), which are mandatory in some cases and optional in the rest. Optional OSs may be traded in markets or through contracts. Both energy and operation services can be provided to other agents via markets or bilateral contracts. Moreover, the regulation in most countries enforces the obligation to provide some type of primary (spinning) reserve to the TSO from any committed generator [21].

In addition to the generators and turbines, the generation plants have the control and communication systems to ensure the correct operation to supply the electricity to the grid in a reliable and secure way. New generators can also own the new assets regarding substations and transmission lines. Traditional generators were large centralized power plants, normally far away from consumers. Now, electricity generation also occurs at the distribution level and lower scales, which is known as DER [8]. Thus, electricity generators can be di fferentiated regarding their connection point with the grid (transmission or distribution), size, and dispatchability. Thus, generators can be bulk generators if they have large sizes and are connected to the transmission network, or they can be connected to the distributed network as DER. Moreover, a key characteristic of generating technologies is if they have the capability of varying their power output at will. Therefore, generating technologies can be di fferentiated in dispatchable and non-dispatchable technologies. It is common today for renewable generators to include batteries in their facilities to operate as conventional generators and provide operation services. Among all technologies, they can also be categorized as renewable (green), non-renewable (orange), nuclear (yellow), and renewable with storage (blue). The most common ones are the following: gas, coal, fuel, Combined Heat and Power (CHP), nuclear, hydroelectric, wind, solar photovoltaics (PV), solar thermal, and biomass. These classifications of technologies based on their connection point, dispatchability, and availability can be seen in Figure 3.

**Figure 3.** Generator technology types.

Generators mainly receive payments for the energy they produce and the operation services they offer. Generators provide electricity to the grid they are connected to (transmission or distribution), and this electricity can be managed by the generators or via a VPP that operates its assets. Regarding the operation services, they also provide them at the network level they are connected to. These services can be provided to the transmission and distribution operators if they meet the system operation service requirements (POS-T, POS-D). Thus, generators produce electricity that they sell in the wholesale market, local market (if connected to distribution), or via bilateral contracts to consumers, VPPs, and storage agents in exchange for economic transactions. Moreover, generators can also provide operation services via markets or contracts with the TSO, DSO, VPPs, and storage, receiving in exchange for them economic transactions. On the other hand, they can also purchase operation services from VPPs and storage agents. Finally, generators may pay fees for participating and using Wholesale Electricity Market (WEM), LMO, and the transmission and distribution grids (if connected to them).

#### *3.3. Virtual Power Plants (VPPs)*

VPPs are defined as an entity that integrates small and geographically distributed generators connected to the distribution system with the objective to provide firm and tradable generation.

VPPs integrate small and disperse generation to perform as a single entity in the wholesale market and power system [25]. Therefore, VPPs behave as a traditional generator in the system, providing energy but also operation services. VPPs help small generators, usually with no control capability, to become a viable and fully qualified generator in the market. The VPP provides this control capacity for them (primary and secondary reserve and voltage regulation) so that they can compete in energy and operation services and markets. The generation resources included in one VPP can easily be modified or switched on or off providing the required flexibility for operation purposes. This flexibility can also be obtained from the DRR by interacting directly with large consumers or through demand aggregators for small and medium-size demand resources. Energy storage may be also a key asset when providing VPP services.

The generators belonging to a VPP are usually spread out over a limited geographical area. The basic activities, relations, and minimum conditions in the framework of the proposed model are shown in Figure 4.

**Figure 4.** Virtual power plant (VPP) activities and relations.

VPPs agents may own or control generators such as renewables, cogeneration plants, traditional thermal generators, or storage systems. Moreover, VPPs need to have the same communication and control needs available as the traditional generators. These requirements should be more complex due to the fact that the VPP has to control large amounts of very distributed resources downstream and, in some cases, very small amounts according to their rated power. Therefore, their communication and computing systems have to be more complex to participate in energy markets.

Regarding its transactions, VPPs interact with many agents. VPPs buy electricity from DG generators connected to the distribution grid and storage agents, or from the local energy market. VPPs sell the electricity to the di fferent markets (wholesale or local). Regarding operation services, VPPs purchase them from medium consumers connected to distribution, aggregators, and storage facilities. These are o ffered to DSO (if they are larger than POS-D), TSO (if they are larger than POS-T), or to other generators via bilateral contracts. Regarding their economic transactions, VPPs purchase electricity from generators and storage to sell them. Bilateral contracts can also be established between VPPs and consumers, retailers, or storage. Between storage and VPPs, bidirectional energy flows may exist. Finally, VPP agents receive payments from the TSO, DSO, and generators after providing the above-mentioned services. In order to obtain these services, VPPs have to purchase them from consumers, aggregators, and storage systems. The VPP is not supposed to pay any fee for participating in the market or using the transmission or distribution grids, as these costs will be translated to the generators that they operate or the consumers that buy electricity from them.
