A Systematic Review of Virtual Power Plant Configurations and Their Interaction with Electricity, Carbon, and Flexibility Markets

Advanced operational strategies are necessary to optimize power systems when integrating Distributed Energy Resources into power networks. To maximize profits from decentralized generation, effective management through Virtual Power Plants is crucial, along with harnessing their full potential in the energy and carbon markets. As part of this study, recent Virtual Power Plant models are systematically reviewed and categorized, highlighting market interactions, optimization techniques, and practical implementations through case studies and pilot projects. Model development, mathematical complexity (e.g., objective function formulations, energy management, problem-solving methods, and decentralized optimization), bidding strategy optimization, and Virtual Power Plant programming approaches are included in the classification framework. Prior review articles frequently fail to categorize key research into flexibility and carbon market integration as distinct forms of market participation. An in-depth analysis of multi-objective optimization, Virtual Power Plant deployment progress, and global market outlook is provided, along with a synthesis of relevant pilot projects and real-world examples. This analysis incorporates the strengths and weaknesses of different Virtual Power Plant models and solution methods. Notably, the implementation of Virtual Power Plant is still limited in real-life settings, with most projects spanning from one day to one year. Unlike previous reviews, this study introduces a novel classification framework that explicitly incorporates flexibility and carbon market participation into the analysis of Virtual Power Plants. This approach extends beyond traditional categorizations, which are limited to energy and ancillary services, thereby providing a more comprehensive understanding of multi-market integration. By applying the Market Coupling Intensity taxonomy, the review establishes a structured pathway for assessing the progression from loosely coupled energy market participation to fully integrated frameworks involving carbon and flexibility products.