Virtual Power Plants (VPPs)
It’s not a new concept but the details are complex and intriguing. If technical issues are solved VPPs could be a significant, even game changing factor in the energy mix providing additional capacity and helping to distribute load both at local and national scales.
What’s a VPP?
The idea goes back a long way. When wind and solar farms were first deployed one obvious draw back was that as single entities, they were of relatively small capacity. If it were possible to connect them in some way so that the total output was something close to a traditional power station, then controlling that aggregated output would be far more effective.
With the proliferation of Distributed Energy Resources (DERs), VPPs have grown to include a wide variety of flexible generation assts which can serve short term balancing markets and ancillary services (such as frequency regulation).
It’s a great concept which has been deployed successfully. However, VPPs gained an important flexibility dimension with the addition of Demand Side Response (DSR), also known as Demand Response.
To define flexibility briefly: it’s a broad term used to describe the ability of assets to ramp up and down in near real-time. Capable assets include hydroelectric, renewable sources, grid scale batteries and DSR sites. It’s this flexibility which can prove valuable when managing today’s electricity demand and is therefore attracting a lot of attention.
Demand Side Response
A component of the flexibility mix, DSR is simply the concept of turning down (or up) large consumers to ‘save’ power at certain times. But the concept goes much further than saving energy.
Imagine you are the Transmission System Operator (TSO), your job is to balance the demand from consumers (domestic and industrial) with supply from all forms of generation. Within the limits of the system, the total amount of energy produced and consumed is unimportant, what matters is that the system is in balance – i.e. supply exactly meets demand.
For this reason, taking demand off the grid is equivalent to adding generation. That’s a neat solution, especially if you are a massive consumer (think very large industry) and can move your times of heavy consumption forward or back a few hours.
That energy will still have to be consumed at some point to run the plant but shifting the load in this way can have significant impact especially if combined with DSR from many consumers. What’s more, the consumer will be paid for offering that flexibility.
Aggregating flexibility and DSR to create large capacity VPPs has been a growing business for several years. It’s a successful model which focusses on the large and mid-size industrial players along with renewable generation.
All well and good, but the additional VPP capacity provided by DSR is limited to a) the consumption of available DSR participants and b) the degree to which those consumers can be flexible.
There is another side to the VPP/DSR concept
The UKs National Grid Electricity System Operator (NGESO) publishes an annual report Future Energy Scenarios (FES), [link here] in which it outlines several scenarios for UKs emissions in the run up to 2050.
In two of the positive scenarios (there is also a failure scenario), the UK meets or exceeds targets. In both these scenarios NGSEO is clearly of the opinion that the involvement of domestic consumers (you and me) is a critical factor. It’s perhaps unsurprising given the volume of energy consumed at a domestic level that household and local demand could have a significant impact on energy consumption.
In Germany, for example, according to 2022 figures from the AGEB, almost a third of electricity was consumed by households.
However, the degree to which domestic and Small Medium Enterprise (SME) demand can be made truly flexible is yet to be seen. This will depend on the participation of individual consumers, the success of emerging technology, involvement of incumbent suppliers, incentives, and completion of grid upgrades.
Smart Grids
One intriguing technical concept which lends itself perfectly to the VPP mix is the smart grid with its local generation and storage.
The concept is simple, as roof top solar, heat pumps, batteries and EVs become more and more widely installed, we connect the houses, shops and offices so that they can dynamically share consumption, generation and storage. Two-way communication from consumer assets to aggregation points and back to the supplier is essential for this to work.
Why not? If my neighbour has fully charged batteries and it’s a sunny day, why not pay him a few cents to charge my EV? On a larger scale perhaps, if the whole street has excess power – sell it to the local school or hospital.
As we go further up the scale, conceptually we see entire communities and towns aggregating supply and demand – perhaps to the point where they can participate in large scale VPPs.
The concept is not new, but the technical challenges are huge
Not least – infrastructure. Grid and distribution systems were not designed to deal with this type of local generation. In addition, the network operator levies charges on every MWh nominated to the grid. This happens at a wholesale level and is recouped by service providers through your energy bill. That charge pays for the cables, transformers and maintenance which connects households and offices to the grid and possibly each other. A new charging structure would have to be developed to pay for infrastructure.
It’s a problem we, as an industry, are working on. A number of companies and start-ups see this as having enormous potential. But the challenges are not only technical. As the FES report points out much will be dependent on consumers (domestic and industrial) adopting principles and embracing the technology.
There is considerable scepticism in many parts of the UK and Germany about smart meters alone. Never mind fully automated local smart grids. Delayed rollouts and poor uptake have hindered the process, and the public will have to be onboard for local smart grids to be effective.
Despite (or perhaps because of) the challenges I’m excited about the prospect of complex technology helping to provide more cost-effective energy. VPPs are set to play a major part in that transition so watch this space.
If you’re interested in learning more, Com Tech Advisory together with Narravito will be hosting a webinar looking at VPPs in general. It’s on the April 17th, why not register or see the recording here: “VPP: Separating Facts from Fiction,”
VPPs in some form could be the future of electricity production, distribution and consumption – an integral part of the energy mix, providing resilience, efficiency and flexibility to a renewable energy landscape.
They are certainly growing fast in popularity amongst energy tech start-ups and I’m looking forward to seeing them develop.
Tim Rogers, Founder, Energy Wise Training
