Pricing Framework for Activation Latency of Fast Frequency Response Provided by VPP

Virtual power plants (VPPs) operating in power systems have the potential to deliver fast frequency response (FFR) services with low latency. However, the existing FFR market design stipulated with a static activation time lacks market incentives that value low latency responses as provided by VPPs. To address this gap, this paper proposes a pricing framework for the activation latency to incentivize VPPs to improve the quality of FFR services. Specifically, a convex frequency nadir approximation is first formulated to capture the influence of activation delays on the frequency nadir at the incident of generation-load mismatch. On this basis, a latency pricing mechanism is developed to monetize the cost of activation latency to the provision of FFR services. Finally, the latency price signal enables VPPs to flexibly optimize the allocation of communication bandwidth resources depending on the real-time operating conditions. Numerical simulations validate the capability of the proposed framework to accurately model the frequency nadir under time-delayed FFR services, assess the impact of various system configurations on activation latency pricing, and demonstrate the economic gain for VPPs under this dynamic pricing mechanism. Notably, with a bandwidth price of 1\}$/Mb, the FFR latency reward mechanism increases VPP revenue by at least 21.72%. This improvement is achieved when it is combined with our proposed bandwidth allocation strategy, compared to the static delay scenario where the VPP control scheme lacks bandwidth allocation capabilities. This work provides key insights into the co-optimization of physical and cyber resources to encourage high-quality fast frequency response.