CSEE JOURNAL OF POWER AND ENERGY SYSTEMS, VOL. 4, NO.
3, SEPTEMBER 2018
Distributed Photovoltaic Generation in the
Electricity Market: Status, Mode and Strategy
Sifan Jiang, Can Wan, Member, IEEE, Chen Chen, Member, IEEE, Erbao Cao,
and Yonghua Song, Fellow, IEEE
Abstract—With the increasingly serious climate change and
energy crisis, photovoltaic (PV) generation, as one of the most
important renewable energy resources, has experienced dramatic
growth worldwide due to its environmental friendliness. How-
ever, the uncertainty and intermittency of PV bring inevitable
challenges to power systems. With the rapid development of
distributed PV and the continuous evolution of the electricity
market, increasingly high penetration levels of distributed PV
generation have led to a series of problems in power system
operations, such as voltage fluctuation, frequency deviation, etc.
The market participation of distributed PV needs to be solved.
Reasonable market participation form, market mechanism and
bidding strategies are vital to the development of distributed PV
in the electricity market. This paper comprehensively reviews
the development and impacts of distributed PV in the electricity
market and discusses the relevant market modes and bidding
strategies in detail.
Index Terms—Bidding strategy, centralized transaction, dis-
tributed PV, distributed transaction, electricity market.
I. I NTRODUCTION
W ITH rapid economic development and globalization,
the environmental issues including global warming, the
greenhouse effect, etc., have drawn more and more attention.
It is well known that the persistent application of traditional
fossil energy in power production can deteriorate the envi-
ronmental issues to some extent [1]. Thus, renewable energy
is regarded as an effective measure to address environmental
problems. Photovoltaic generation is considered as one of
the most attractive renewable energy resources because of its
economy, safety, low geographical demand and low marginal
cost. As a result, PV generation is growing extremely fast
throughout the world as shown in Fig. 1.
Manuscript received June 4, 2018; revised July 9, 2018; accepted July
10, 2018. Date of publication September 30, 2018; date of current version
July 18, 2018. This work was partially supported by the National Key R&D
Program of China (2018YFB0905000), National Natural Science Foundation
of China (51761135015, 51877189), and the Fundamental Research Funds for
the Central Universities (2018QNA4015). The work of C. Wan was supported
by the Hundred Talents Program of Zhejiang University.
S. F. Jiang and C. Wan (corresponding author, e-mail: canwan@zju.edu.cn)
are with the College of Electrical Engineering, Zhejiang University, Hangzhou
310027, China.
C. Chen is with Argonne National Laboratory, 9700 S. Cass Avenue,
Lemont, IL, USA.
E. B. Cao is with the College of Economics and Trade, Hunan University,
Changsha 410079, China.
Y. H. Song is with the Department of Electrical and Computer Engineering,
University of Macau, Macau, China, and also with the College of Electrical
Engineering, Zhejiang University, Hangzhou 310027, China.
DOI: 10.17775/CSEEJPES.2018.00600
2096-0042 © 2018 CSEE
263
120
Cumulative installed
100
PV capacity (GW)
80
60
40
20
0
2011 2012 2013 2014 2015 2016 2017/Year
CHA USA JPN IND GBR GER
Fig. 1. Cumulative installed PV in the world.
In 2016, the newly installed solar PV power of about 75 GW
was more than all the world-wide installed capacity until the
end of 2011. In 2017, the global PV generation capacity has
reached 312 GW [2]. Due to the access threshold, flexible
settings, convenient local consumption of distributed PV, the
annual installed capacity of distributed photovoltaic is much
larger than that of centralized photovoltaic. In particular, the
cumulative installed capacity of distributed PV occupies about
60% of the total capacity in 2016 [3]. More than 90% of
photovoltaic systems in Germany are distributed. Europe, as
the world’s largest photovoltaic power generation region [4],
accounts for about one-third of the global total PV installed
capacity. In 2017, photovoltaic covered approximately 7.2% of
Germany’s net electricity consumption. Benefiting from new
policies and market developments, the new installed capacity
in Asia reached 50 GW, and the newly installed capacity
in the United States also exceeded 14 GW [5]. In China,
distributed PV keeps growing as Fig. 2, new installed capacity
of distributed PV in the proportion of all PV increased from
6% in 2013 to 36% in 2017, the total amount of distributed
photovoltaic installed capacity reached 19.44 GW, ranking first
in the world. In late 2017, the Chinese government issued the
“Notice on Launching Pilot Markets for Distributed PV Gener-
ation” to further incentivize the development of distributed PV
market transactions. It is foreseeable that China’s distributed
PV will continue to maintain its sustainable growth [6].
Despite the increasing penetration level of PV, various
problems have been gradually exposed. First of all, the power
generation of distributed PV is greatly limited by actual solar
radiation and other weather factors. Therefore, the intermit-
tency of the PV power supply requires reliable backup power
with sufficient capacity. Secondly, the excess installation of
distributed PV leads to power overproduction [7], and the issue
264
Installed generating capacity (MW)
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
0 PV to have the same market position as traditional energy
2010 2011 2012 2013 2014 2015 2016/Year
New installed generating capacity (104 kW)
New installed PV capacity (104 kW)
Distributed PV capacity (104 kW)
Fig. 2. 2010–2016 Annual installed generating capacity in China.
of PV energy consumption also needs to be solved in time [8].
In addition, the complicated distributed PV grid-connected
issue has negative impacts on the power quality, such as
voltage and frequency [7]–[9]. In general, the power grid is
facing higher challenges due to the gradual increase in the
proportion of distributed PV generation [10].
Furthermore, the participation of the distributed PV in the
electricity market is still in the exploratory stages. On the
one hand, traditional energy has maintained its advantages in
the electricity market, and the traditional electricity price has
approached its marginal cost, and its dominant market share
allows it to gain huge market power. These factors lead to a
negative impact on the performance of distributed PV in the
electricity market.
In order to develop distributed PV, many countries have
introduced corresponding policies for the photovoltaic in-
dustry [11], [12]. Germany, as the leading country of PV
generation, holds about a quarter of the world’s cumulative
PV installed capacity. On the first day of 2018, renewable
energy in Germany momentarily covered the entire electricity
consumption for the first time [13]. As early as the end of
the last century, Germany proposed the “Million Solar Roofs
Project”, and the German Renewable Energy Act continued
to provide subsidies for PV development in the form of a
Feed-in-Tariff (FiT), photovoltaic bidding and premium-based
payments [14]. In China, the government has made great
efforts to promote the development of the PV market due
to the need of CO2 reduction and domestic energy security.
Taking into consideration the impact of distributed PV on the
electricity market, the government is strongly subsidizing the
PV industry. Furthermore, a number of corresponding plans,
such as the “Golden-Sun Program”, have been introduced to
efficiently provide help from many aspects such as investments
and the electricity price [15].
In addition to policies and subsidies, developing proper
market mechanisms and bidding strategies have drawn great
deal of attention to enhance the competitiveness of distributed
PV. According to the existing experiences, there are three main
ways for distributed PV to participate in electricity market
competition. First, the large-scale PV entities are directly
involved in market competition, such as traditional energy
utilities, and submitting transaction information to higher-
level independent operators for unified market clearing [16].
CSEE JOURNAL OF POWER AND ENERGY SYSTEMS, VOL. 4, NO. 3, SEPTEMBER 2018
Second, PV owners within a certain area authorize a single
agent to make power trading on their behalf, then the agent
conducts power dispatching in the region according to the
results of the transaction [17]. Third, different from the former,
two centralized transaction modes, and different distributed PV
entities can achieve direct transactions through the establish-
ment of a secondary market in a decentralized way [18]. The
purpose of these different approaches is to allow distributed
utilities and to gradually gain market share through its own
advantages.
In the electricity market, the trading entity’s marketability
is primarily reflected in its ability to control prices and profits.
A reasonable bidding strategy should be able to take full
advantages of the characteristics of distributed PV to maximize
the benefits while making its price competitive in the market.
It can be achieved in multiple ways. First of all, the strategy
should allow for the accurate prediction of electricity demand
and PV power, which is the basic guarantee for the feasibility
of the bidding strategy [19], [20]. The strategy should give
full consideration to the competitive nature of the bidding
behavior, that is, the influence of other market players [21],
[22]. In addition, the bidding strategy should consider the
actual structure of different distributed PV entities and the
impacts of auction results on scheduling.
This paper systematically reviews the status quo of dis-
tributed PV in the power market in recent years, then analyzes
and sorts the market capabilities of distributed PV according
to the relevant market mechanism and bidding strategy. The
rest of the paper is organized as follows. Section II gives
a brief introduction to the characteristics of distributed PV
and its impacts on power systems. Section III describes the
changes of market participants and roles after the integration
of distributed PV. The distributed PV market modes are
presented in Section IV. Section V illustrates various bidding
strategies and methods for distributed PV. Finally, Section VI
summarizes this paper.
II. I NFLUENCES OF D ISTRIBUTED PV ON P OWER
S YSTEMS
Considering that distributed PV has some generation charac-
teristics different from traditional energy sources, it will bring
about changes in their integration into the traditional power
net. These changes will affect the way the power net operates
and further affect the operation of the electricity.
A. Characteristics of Distributed PV
1) Stochasticity
The stochasticity of distributed PV makes prediction a
critical issue in the study. Additionally, the analysis of PV
uncertainty plays an important role in the economic and secure
operation of the power grid [8]. Due to the high complexity
of the weather system, it is difficult to accurately predict and
eliminate the prediction error. Fig. 3 is a typical generation
curve of distributed PV in different weather conditions. The
amount of electricity generation uses normalized data. Con-
sidering the complex statistical characteristics, the problem is
JIANG et al.: DISTRIBUTED PHOTOVOLTAIC GENERATION IN THE ELECTRICITY MARKET: STATUS, MODE AND STRATEGY
0.9
0.8
Power Generation
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00
0: 1: 2: 3: 4: 5: 6: 7: 8: 9: 10: 11: 12: 13: 14: 15: 16: 17: 18: 19: 20: 21: 22: 23: 0:
Time
Fig. 3. Generation power of one roof PV in a city of East China under
different weather conditions.
often solved in the form of probabilistic forecasting. Most con-
ventional probabilistic forecasting methods are based on the
parametric models of probability distribution [23]–[26]. Since
the methods mentioned above depend largely on the accuracy
of the distributed model, they are more or less impacted by
empiricism and subjectivity. Others utilize the Monte Carlo
method [27]–[29], through which they can establish more
objective mathematical models using historical data. On the
basis of the strong regression capabilities of machine learning
models [30]–[32], various probabilistic forecasting models
have been proposed to quantify the prediction uncertainty of
distributed PV generation.
2) Decentralization
The flexibility of distributed photovoltaic primarily reflects
its decentralization. Compared with traditional power plants
built in a centralized approach, distributed photovoltaic has
relatively fewer constraints of territory. For illustration, un-
der the current intensive urban environment, photovoltaic on
buildings becomes a widespread and effective modality [33],
[34].What’s more, the decentralized mode takes the con-
struction out of the complex approval process, compared to
centralized photovoltaic power plants, and provides a good
foundation for photovoltaic local consumption.
3) Eco-friendly Advantage
The majority of environmental protection policies focus
on carbon emissions which is a problem existing inherently
in traditional energy-based power generation. Photovoltaic
generation, by contrast, is theoretically carbon-free. Thus PV
generation possesses incomparable superiority in mitigating
carbon emission as well as meeting the relevant policy require-
ments [35]. Furthermore, there is no solid or liquid waste in
the process of power generation [36] and no noise pollution
to the environment [37].
4) Economic Benefit
Low cost is one of the essential reasons of regarding pho-
tovoltaic energy as a critical future energy source. Compared
with the unsustainability of traditional energy [38], a solar
energy resource is independent of fossil fuel [37], considered
to be nearly infinite. Therefore, it will never be monopolized
by several countries [2]. Although distributed PV still has
defects, considering its technical and scale constraints, we
cannot deny its considerable economy prospects.
265
B. Impacts on Power System
sunny
Distributed PV has two primary operational modes, one
is island operations, and the other one is grid-connected
rainy
operations. During the island operation, distributed PV usually
cooperates with other forms of energy including wind power,
hydroelectricity and the energy storage system, realizing the
electric power balance in the local area. While under the grid-
connected operational mode, electricity flows between the PV
integration area and the main grid, which inevitably challenges
the operation when PV power greatly accesses the grid.
The significant fluctuations of distributed PVs can cause
large changes in the load flow of the distribution lines, which
increases the difficulty of voltage regulation [8], [10], [39].
What’s more, employing massive electronic equipment in
generation devices has distinguished its voltage regulation
and control method with the conventional power grid [40],
[41]. These generation devices are generally equipped with
inverse power relays and will not inject power into the grid
under normal situations. Nevertheless, once the distributed PV
power in the distribution system fails, there will be electricity
injected into the power grid at the moment of the short circuit
occurring, which may cause the switching short-circuit current
in the power distribution network to exceed the standard,
affecting the safe operation of the power grid. In addition,
the distributed PV generator is a non-synchronous generator
which is difficult to provide frequency response especially
when disequilibrium exists between the load and generation.
Therefore, when subjected to large disturbances, photovoltaic
power generation may confront a series of operational and
safety issues due to insufficient control of the frequency [42],
[43].
III. E LECTRICITY M ARKET C HANGES BY
D ISTRIBUTED PV
A. Access Problem of Distributed PV
The development of PV generation is always accompanied
by problems within the electricity market. However, it is
difficult for distributed PV to get its place in the current
electricity market with bulky and mature traditional energy
generation in place.
Primarily, the gap in the cost between PV and traditional
energy can be hardly neglected. This gap can be attributed
to various aspects. The first one comes from technological
development. Energy conversion efficiency directly affects the
cost of photovoltaic power generation. Through decades of
technology accumulation, the thermoelectric conversion effi-
ciency of traditional energy has increased to 40% or even 45%,
while the conversion efficiency of photovoltaic power still
hovers between 10% and 15%. The other aspect is that due to
the intermittency of photovoltaic generation, the photovoltaic
power supply needs to solve the problem of energy storage.
However, low-cost energy storage is difficult to achieve and
the power storage capacity is still difficult to rise. Therefore,
the overall cost of PV generation is still high compared to
traditional energy sources under the current technology.
The electricity market is inherently repulsive to new market
players, such as thermal power and nuclear power, which
266 CSEE JOURNAL OF POWER AND ENERGY SYSTEMS, VOL. 4, NO. 3, SEPTEMBER 2018
have taken the leading position and have absolute control over
the market price, while the electricity price fluctuations in
distributed PV does not seem to have an evident impact on the
market price. In addition, the decentralized generation feature
of distributed PV creates additional grid construction costs.
Nevertheless, it is an irreversible trend for distributed PV to
enter the power market under various reasons including cost
reduction, flexible construction and operation, environmental
protection, etc. Many countries also actively take multifarious
measures to enhance the competitiveness of distributed PV
such as the Emission Trading Scheme (ETS) [44], FiT [45],
and the Renewable Portfolio Standard (RPS) [46]. In fact,
the rising global crude oil prices and international concerns
about nuclear power generation have unfavorable impacts
on electricity prices of traditional energy. With the rapid
development of distributed PV and related technologies [47],
there is no doubt that distributed PV will become more and
more competitive in the power market.
B. Influences on the Electricity Market
1) Impacts on the Market Environment
Being different from the high access threshold of traditional
energy generation, distributed PV can co-exist with com-
mercial, industrial, agricultural and even resident buildings.
After meeting its internal demand, surplus power can trade
in the electricity market. Its identity in the market depends
on the relationship between its own electricity generation
and consumption: when it generates more electricity than it
consumes, it is a power seller, otherwise it is a power buyer. Its
identity is a collection of consumers and producers: prosumer.
In addition, individual distributed PV owners may not be able
to directly participate in the market because of their small
scale, thus integrating these distributed PVs into a power unit
maybe a better choice. We call the manager of the integration
the aggregator. These two factors will have a lot of market-
related impacts. With the large-scale installation of distributed
PV, the number of participants in the demand-side market will
increase, and the market competition will become fiercer. As a
result, the original vertical power supply system will be greatly
impacted and the market will develop in the direction of
perfect competition. What’s more, the emergence of prosumer
requires the original market structure to be adjusted accord-
ingly. The market is no longer a simple bilateral transaction
between buyers and sellers. The change of roles from time
to time makes it possible for multi-level power transactions,
which also benefits the broader-participating energy internet.
In addition, power companies do not just rely on power
transactions, but are also expected to make more profits in
providing ancillary services [48], such as reactive and voltage
control, loss compensation, load tracking, system protection
and energy imbalances control. Public utilities will play a
more important role in ensuring the safety and reliability of
the distribution system with high penetration of distributed PV.
2) Influence on Electricity Price
Under a mature market environment, the price of electricity
should be determined by the marginal cost of generation.
The price has been stable under the domination of coal,
gas and other traditional energy. However, the rapid increase
of distributed PV will have a non-negligible impact on the
electricity price [49].
In the traditional power generation situation, the number
of operating hours per year is relatively high. When the
distributed photovoltaic occupies an appreciable share, their
annual operating hours will decrease, the proportion of fixed
costs will be much higher which in turn raises their marginal
costs correspondingly. Compared to the distributed PV with
almost zero marginal cost, the market competitiveness of
traditional energy will inevitably decline [50].
The increase in the proportion of distributed PV will bring
about the spread, that is, the difference between the peak and
valley electricity prices [51]. In the case of traditional energy
sources, the peak-valley of the electricity price primarily
depends on the level of the electricity load, and due to the sta-
bility of its power supply, the spread will not be exaggeratedly
wide. However, when the distributed PV becomes dominant,
the emergence of high electricity prices may depend more
on solar radiation factors and price fluctuation will increase
significantly. Such changes in spread may result in changes in
operating modes and bidding strategies, and storage equipment
and flexible peak-regulating units will become more valuable.
IV. M ARKET M ODES FOR D ISTRIBUTED PV
In the market environment, distributed PV needs to seek a
reasonable form in order to participate in the operation of the
market, which requires certain policies and methods suitable
for the existing market environment. Under the existing power
system, most of the electricity markets are centralized markets
where buyers and sellers trade in the same trading center man-
aged by independent system operators. Centralization brings
the concentration of transaction information, making clearing
and scheduling easy. However, efficiency and flexibility are
limited in this situation. When distributed generation gradually
emerges, the form of the decentralized power market is being
given more attention. Decentralization, or multi-centralization,
can lead to more flexible trading options.
A. Centralized Transaction
For distributed PV, the most basic mode is to participate
directly in the electricity market via an independent way
as shown in Fig. 4, where the arrows indicate the power
transaction, just like other power generation entities. General
companies sell power and distributed PV companies buy or sell
power according to the actual situation. All the transactions
are conducted in the electricity market and are scheduled by
Electricity market
(ISO)
GenCo1 Ă GenCo2 Ă LDA1 Ă LDA2
DisCo DER prosumer consumer Ă DisCo DER prosumer consumer
Fig. 4. Centralized transaction mode.
JIANG et al.: DISTRIBUTED PHOTOVOLTAIC GENERATION IN THE ELECTRICITY MARKET: STATUS, MODE AND STRATEGY
an independent system operator (ISO). In fact, this mode is
extremely harsh for distributed PV. First, it needs sufficient PV
capacity to ensure competitiveness in the electricity market.
Second, it needs to be able to overcome the uncertainty of PV
and provide reliable bidding information. Therefore, it is often
necessary to use other means to assist distributed PV to have
access to the market.
Except the research on power generation forecasting [51].
The government can provide policy and financial measures
to help distributed PV, which primarily refers to the change
and supplement of the market mechanism to meet the needs
of distributed PV, such as the design of PV generation price
mechanisms and the auxiliary market [52]. Financially, the
government can provide subsidy-based measures to help dis-
tributed PV to get a firm foothold in the electricity mar-
ket [53]–[55]. For example, the subsidy standard is 0.37 ¥/kWh
in China and 12.20 C-cts/kWh in Germany [5].
In addition, relevant regulations can be set up to help
distributed PVs gradually adjust to the market-oriented en-
vironment. For instance, implementing feed in tariff policies
to receive non-market photovoltaic power [56], then grad-
ually transition to the distributed PV market participation,
the government subsidies for the price spread [57], reduce
subsidies slowly until the PVs have the ability for bidding
independently. Through this process, the market participation
ability of distributed PV can be signally improved.
B. Aggregation Based Transaction
Due to the uncertainty of distributed PV and its defect in
market competition, the aggregation among various distributed
PV owners and other energy forms have become important
ways to participate in the market [58]. The structure is
demonstrated in Fig. 5.
Several distributed PV utilities including distribution com-
panies, distributed energy resources (DER), prosumers and
consumers within a region can be regulated by the local
distribution aggregator (LDA) to conduct power trading in
Market Price
Signals
Schedules
DER Provider
Bilateral
Transactive
Bids and Offers
Consumers
Fig. 6. Operation and interaction mode of micro grid in electricity market.
267
Electricity market
(ISO)
GenCo1 Ă GenCo2 Ă DisCo1 Ă DisCo2
Fig. 5. Aggregation based transaction mode.
the electricity market. The distributed system operator (DSO)
performs power dispatch within the region according to the
transaction results. The micro-grid can be a successful prac-
tice in this way [59]. Its operation and interaction mode is
described as shown in Fig. 6. By integrating distributed PVs
within the region and interacting with consumers, prosumers,
and other related parties, the microgrid can provide a rational
way for distributed PV to participate in the electricity market.
The combination of different energy forms can mitigate the
uncertainties of renewable energy to a certain extent. Mean-
while, by forming a regional combination of power generation
and utilization, energy can be consumed nearby, power losses
can be reduced, and grid pressure can be alleviated.
There are different ways of aggregation for different re-
gional scales ranging from a small building to an industrial
estate even a whole city. Generally, there is an independent
operating agency called the aggregator that predicts the power
consumption of each subordinate entity, bids on the market,
and dispatches all the distributed PV units in the area after
market clearing. Moreover, a real-time price system (RTP) and
demand response [60] greatly enhances the flexibility of the
aggregation system like a micro grid, which in turn enhances
its competitiveness [61].
Issues of profit distribution and property rights will appear
more frequently in this situation. For small-scale photovoltaic
integration, aggregators often have the right to directly control
subordinate power equipment. When it comes to a larger
scale, the aggregator’s role tends to change from controller
to dispatcher. During the management process, the aggregator
will directly determine the distribution of benefits for each
Bulk Power
Markets
Price Utility Distribution
Signals Company
Schedules
Schedules
Local Prosumer/
DSO Entity Preferences
Operator
Instructions
Prosumers
Market Price
Signals
Schedules Schedules
Microgrid
Bilateral
Transactive
Bids and Offers
268
PV owner based on capacity, equipment utilization, power
generation or other considerations. However, no matter what
form they take, it is necessary to ultimately reach agreement
with stakeholders, which requires a reasonable mechanism
setting.
C. Decentralized Transaction
Under the existing market system, power trading is mostly
conducted in a vertical way, while secondary or decentralized
market transactions are subject to various restrictions. Given
the potential benefits of decentralized transactions such as
power balance and cost reductions, many studies have men-
tioned the idea of trading directly between distributed energy
resources [29], [62]. This type of transaction can be realized
through many types of methods, such as the transactions
between each aggregator under the distribution network, or in
the form of smaller, decentralized small exchange DSOs, even
between each individual prosumer, or rather, P2P [63]–[65],
as depicted in Fig. 7.
Electricity market
(ISO)
LDA
GenCo DisCo
(DSO)
DisCo prosumer DER consumer
Fig. 7. Decentralized transaction mode.
On the hardware level, the implementation of a decentral-
ized transaction needs to solve some problems: (1) The physi-
cal realization of the transaction relies on a more sophisticated
power network; (2) Comprehensive monitoring equipment and
measures are needed to ensure its power balance and security,
taking power flow distribution, bidirectional flow and other
issues into account; (3) When the trading entities within the
region participate in the transaction, there is a need for a
communication and data-transmission system different from
the original two-way trading model. The system should not
only consider the quantitative changes and additions of trading
participations, but also enhance the security and privacy of
the trading process. In the current technology, the use of
blockchain may be a reasonable solution [66], [67], which
has high potential in distributed PV trading.
Last but not least, decentralized transactions that are par-
tially separated from the primary market should have matching
trading rules and modes to ensure a reasonable allocation
of benefits and the enthusiasm of participants and reduce
the unnecessary power loss [68]. Although this form is still
immature and lacks market examples worldwide so far, it
stands a good chance to become an important market mode in
the future under the background of the rapid development of
the smart grid and distributed PV generation.
CSEE JOURNAL OF POWER AND ENERGY SYSTEMS, VOL. 4, NO. 3, SEPTEMBER 2018
V. B IDDING S TRATEGY FOR D ISTRIBUTED PV
Different bidding strategies should be adopted to meet the
actual needs for different types of distributed PV market.
The combination of complicated factors makes the bidding
strategy of the distributed PV a comprehensive decision-
making problem under the uncertainty of the price and the
competitor’s strategy [69].
A. Centralized Transaction Bidding Strategy
For distributed PV with large-scale, high-capacity and in-
dependent property rights, the traditional way of directly par-
ticipating in the market is obviously a simple and convenient
option. In this case, the ordinary bidding strategy is feasible as
long as it takes into account the corresponding characteristics
of distributed PV.
1) Deterministic Bidding Strategy
For deterministic strategies, common types of objective
functions are the minimum cost, maximum profit, etc. Taking
into account the complex objectives and scheduling manage-
ment, many works also put forward some special objectives
such social welfare [29].
In a direct model, the bidding strategy only needs to
consider its own power generation, sell surplus power at
a high price, and buy low power at a low price. Such a
model can be realized through a traditional programming
method [70]. However, in actual distributed PV circumstances,
as more factors including power storage, output curve of
distributed PV and scheduling cost need to be considered
and the market mechanism becomes more complicated, there
will be more restrictive factors in the bidding strategy [71].
Taking into account the weak dispatching feature of renewable
energy especially the distributed PV, the purpose of distributed
PV’s participation in the market should be to achieve the
most optimal strategy under the unbalanced power penalty,
maximize income and reduce penalties. It is evident that the
optimal strategy under a fully competitive market should make
the actual power generation as close as possible to the clearing
amount.
2) Stochastic Bidding Strategy
It is a well-known fact that there are a lot of uncertainties
related to penetration for distributed PV, including the weather
conditions, demands of each PV owner, etc. These bidding
problems are often difficult to solve through deterministic
methods and there is a need to resort to stochastic strategies.
Through stochastic measures, the load and generation can be
modeled through forecasting and the scenario production in
decision making [20], [72]. For the electricity price, corre-
sponding uncertainty quantification models can be constructed
via probabilistic forecasting [22], [73].
In the market environment, a significant uncertainty of
distributed PV power trading comes from competitors’ bidding
strategies. If there is a predictive analysis of the bidding for
other distribution companies and distributed PV aggregators
and they make appropriate responses, there is no doubt that
profits can be increased. Reference [74] proposes a stochastic
bi-level model to involve various uncertainties including rival’s
competitive bidding strategies, prices in a balanced market
JIANG et al.: DISTRIBUTED PHOTOVOLTAIC GENERATION IN THE ELECTRICITY MARKET: STATUS, MODE AND STRATEGY
and distributed generation. Furthermore, it maximizes the
profit in the power market with MILP through a linear active
distribution network (ADN) operation model. Reference [75]
uses a robust optimization approach for uncertainty modeling
of upstream grid prices to obtain an optimal bidding strategy.
B. Aggregation Based Bidding Strategy
Distributed PV usually participates in the bidding as part of
a microgrid when taking an agent-based trading model. This
model has significant advantages. First, the uncertainties of
distributed PV can be offset by other facilities in the microgrid
such as energy storage and small thermal power stations [24].
Second, the aggregative bidding model will be preponderant in
terms of scale compared to individuals, and thus have greater
flexibility in bidding in the electricity market. In addition, a
microgrid system is often a prosumer. In such a scenario, the
auction model is obviously much more complex.
It is apparent that participants, especially the distributed
PV owners, will have different choices of decision-making
because of their different risk appetites under different entity
sizes and configurations. Reference [76] innovatively uses
the Analogs Ensemble method to forecast the amount of
distributed PV power generation and applies it into the cal-
culation of the economic dispatch and unit commitment. For
aggregators with different risk-taking zeal, a model is set up
by a genetic algorithm to provide an optimal bidding strategy
and dispatching method. Similarly, Reference [77] proposes a
budget-based analysis method for different entity scales, and
analyzes the aggregator’s profitability under the two decision-
making scenarios of Worst-Case Strategy and Average Profile
Strategy.
What’s more, aggregation with other resources is, in order
to solve the problem of large energy deviation of a single
distributed PV, the wind-solar coordination co-bidding model
which is proposed in [69]. Through participating in the market
with the same agent, taking into account the different condi-
tions of the stochastic scenario constraints, unified scheduling
can reduce the overall imbalance in electricity, thereby increas-
ing the benefits obtained.
C. Decentralized Transaction Bidding Strategy
Under the aforesaid bidding strategies, most of them con-
sider only the strategy with the ISO at the upper level.
Generally speaking, when the distributed PV generation has
a surplus, the selling price of electricity is relatively lower,
and when it is insufficient, the purchasing price will be
relatively higher; this is one of the typical characteristics
of the vertical trading model. If a new retail trading model
can be created to make the transaction carried out between
the same-level prosumers [29] by the decentralized method
or P2P approach [63], the price level will further decrease.
On this basis, it is feasible to use the Nash equilibrium for
taking into account the use of game theory in trading between
prosumers [62].
Meanwhile, as a distributed public ledger connects the
blocks into a chain to realize peer-to-peer transactions [66],
the blockchain technology provides a reliable solution of
bidding considering the information interaction and privacy
269
issues of P2P distributed PV transactions. Reference [78]
proposes a Nbitcoin-based trading framework supported by
the blockchain technology, realizes direct transactions between
distributed prosumers and proposes corresponding pricing
models.
VI. C ONCLUSION
In this paper, we review the recent research on the develop-
ment of distributed PV in the electricity market. Based on
the analysis of the current status of global distributed PV
development, the impacts of distributed PV on the power
grid and electricity market are described in detail with its
various characteristics. We also summarize the three main
trading modes of the distributed PV market: direct partici-
pation, aggregation and decentralized transactions. Moreover,
we analyze bidding strategies and corresponding models for
different trading modes. With the increasing penetration of
distributed PV in modern power systems, its trading mode and
application scenarios will gradually expand in the future. On
the one hand, the micro-market and P2P market of distributed
PV will gradually develop with the decline of PV costs and the
formation of PV trading clusters. On the other hand, the power
generation characteristics of distributed PV enables it to form
a complementary cooperation with other energy operations
and industries, and multi-energy trading becomes possible. In
short, distributed PV has great prospects in the environment
of the electricity market.
ACKNOWLEDGMENT
The authors would like to thank Prof. Pierre Pinson at the
Center for Electric Power and Energy, Technical University of
Denmark, for valuable discussions that were helpful for the
enhancement of this paper.
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Sifan Jiang received the B.S. degree from Zhejiang
University in 2017. He is currently pursuing the
Master’s degree in the College of Electrical Engi-
neering, Zhejiang University, Hangzhou, China.
Can Wan (M’15) received the B.Eng. degree from
Zhejiang University, Hangzhou, China, in 2008, and
the Ph.D. degree from The Hong Kong Polytech-
nic University, Hong Kong, in 2015. He is cur-
rently a Research Professor with the College of
Electrical Engineering, Zhejiang University, under
the university Hundred Talents Program. He was a
Postdoc Fellow with the Department of Electrical
Engineering, Tsinghua University, Beijing, China,
and a Research Associate with the Department of
Electrical Engineering, The Hong Kong Polytechnic
University. He was a Visiting Scholar with the Center for Electric Power and
Energy, Technical University of Denmark, and Argonne National Laboratory,
Lemont, IL, USA. His research interests include forecasting, renewable
energy, smart distribution network, integrated energy systems, and machine
learning.
Chen Chen (M’13) received the B.S. and M.S.
degrees in electrical engineering from Xi’an Jiao-
tong University, Xi’an, China, in 2006 and 2009,
respectively, and the Ph.D. degree in electrical en-
gineering from Lehigh University, Bethlehem, PA,
USA, in 2013. During 2013–2015, he worked as
a Postdoctoral Researcher at the Energy Systems
Division, Argonne National Laboratory, Argonne,
IL, USA. He is currently a Computational Engineer
with the Energy Systems Division, Argonne National
Laboratory. His primary research interests include
optimization, communications and signal processing for smart electric power
systems, cyber-physical system modeling for smart grids, and power system
resilience. Dr. Chen is an editor of IEEE Transactions on Smart Grid and
IEEE Power Engineering Letters.
Erbao Cao received the Ph.D. degree in manage-
ment science and engineering from Hunan Univer-
sity, Changsha, China, in 2008. He was a Research
Associate with Hong Kong Polytechnic University,
Hong Kong, from 2010 to 2011. He is currently
a Visiting Scholar with the University of Illinois
at Urbana-Champaign, Champaign, IL, USA, and
a Professor with Hunan University. His current
research interests include operations research and
management science.
272 CSEE JOURNAL OF POWER AND ENERGY SYSTEMS, VOL. 4, NO. 3, SEPTEMBER 2018

Yonghua Song (M’90–SM’94–F’08) received the

B.Eng. and Ph.D. degrees from Chengdu University
of Science and Technology, Chengdu, China, and
China Electric Power Research Institute, Beijing,
China, in 1984 and 1989, respectively.
Currently, he is Rector of the University of Macau,
and also an Adjunct Professor at the College of Elec-
trical Engineering, Zhejiang University, Hangzhou,
China. He was Executive Vice President of Zhejiang
University from 2012 to 2017. From 1989 to 1991,
he was a Post Doctoral Fellow with Tsinghua Uni-
versity, Beijing. He then held various positions at Bristol University, Bristol,
U.K.; Bath University, Bath, U.K.; and John Moores University, Liverpool,
U.K., from 1991 to 1996. In 1997, he was a Professor of power systems
with Brunel University, Uxbridge, U.K., where he has been the Pro-Vice
Chancellor of Graduate Studies since 2004. In 2007, he took up the Pro-
Vice Chancellorship and Professorship of Electrical Engineering with the
University of Liverpool, Liverpool. He was a Professor with the Department
of Electrical Engineering, Tsinghua University, where he was an Assistant
President and the Deputy Director with the Laboratory of Low-Carbon
Energy in 2009. His current research interests include smart grid, electricity
economics, and operation and control of power systems.
Prof. Song was a recipient of the D.Sc. Award from Brunel University in
2002 for his original achievements in power systems research. He was elected
Vice President of the Chinese Society for Electrical Engineering (CSEE) and
appointed Chairman of the International Affairs Committee of the CSEE
in 2009. In 2004, he was elected as a Fellow of the Royal Academy of
Engineering, U.K.