Fairness as an Investment: Dynamic Participation and Long-Run Profit in Virtual Power Plants

Abstract: We show that incorporating fairness constraints into virtual power plant (VPP) operations can incentivize consumer participation and thus improve the aggregator's long-run profitability. VPPs rely on sustained participation from heterogeneous consumers to provide a variety of grid services whose timing and frequency are often uncertain. As a result, consumers' willingness and ability to provide flexibility evolve over time, creating a dynamic link between past participation and future resource availability. We develop a dynamic aggregation framework to study how fairness in service allocation affects future participation and long-run profitability. By linking current dispatch decisions to future resource availability, we show that fairer allocations can strengthen consumer engagement, expand aggregate availability, and create additional value during high-price and high-demand events. To balance fairness and operational efficiency, we introduce a slack-augmented allocation mechanism that preserves most of the participation benefits from fairness while avoiding unnecessary reductions in service procurement. We derive conditions under which the resulting availability gains outweigh the short-run cost of redistribution and validate the approach using real-world consumer behavior and electricity market data from Norway.