Translation-Symmetric Market: Enabling Incentive Compatibility For DER Aggregation

Abstract

Virtual power plants (VPPs) are important for coordinating the rapidly growing portfolios of distributed energy resources (DERs) and enabling them to deliver multiple services to higher-level electricity markets. However, profit allocation procedures for VPP participants become increasingly difficult to design in an incentive-compatible manner, owing to the increased market power of DERs within each VPP relative to their direct participation in wholesale markets. In this paper, we introduce translation symmetry in electricity markets and apply it to VPP aggregation of DERs for market participation to design an incentive-compatible profit allocation method. Under the stated assumptions, we prove that this translation symmetry induces an inductive property: once incentive compatibility holds at an upper level, it propagates to the internal settlements between the VPP and its constituent DERs, thereby supporting incentive compatibility throughout the hierarchy. We further show that service prices are invariant across levels, which helps preserve competitive conditions and enables transparent value assessment. Theoretical analysis and case studies illustrate how this translation-symmetry-based approach can enable incentive-compatible profit allocation when aggregating DERs to provide multiple services.