Virtual power plants and the future of grid management

Sally Jacquemin, VP and general manager of Power & Utilities at AspenTech, describes why virtual power plants (VPPs) are the vanguard against skyrocketing demand from resilient power systems.

Electric utilities must actively evolve to meet the demands of sustainable and resilient power systems. VPPs are in the vanguard of this ongoing drive as they are a much-needed flexibility tool to balance power demand to generation. This dynamic, fast-growing sector is estimated to have a market size of $3.42 billion in 2022 growing at a compound annual growth rate (CAGR) of 22% from 2023 to 2030 according to Grand View Research.

This positive projected growth path is perhaps not surprising given the manifold benefits that the technology offers. VPPs work by integrating decentralised energy resources and small-scale renewables (including solar panels, electric vehicles and smart thermostats) into a consolidated unit of power that is large enough to offer the grid operators a flexibility tool to dispatch in order to maintain a balanced grid through real-time operations. This integration enhances grid stability, improves energy efficiency and facilitates the transition to a zero carbon grid.

By optimizing use of many small grid assets at once, VPPs can be used to shift power load so that the use of fossil fuels and peaker plants can be reduced or avoided. This coordination helps balance supply and demand across the grid while managing bi-directional power flow within limits.

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How utilities can reap the rewards

VPPs are driven by sophisticated software that aggregates various small-scale distributed energy resources and storage. This integration transforms dispersed assets into a unified and robust whole unit, capable of responding dynamically to the grid’s fluctuating demands.

For utilities, the adoption of VPPs signifies a shift from traditional, costly power production methods to more economical and environmentally-friendly alternatives. This shift not only reduces dependence on fossil fuels but also may reduce the need for extensive infrastructure investments.

VPPs improve grid stability by balancing supply and demand dynamically. They can respond quickly to fluctuations in energy production and consumption, preventing blackouts and ensuring a steady power supply. During peak demand periods, VPPs can dispatch stored energy from batteries or reduce consumption through demand response programmes, easing the burden on the grid. By leveraging advanced algorithms and real-time data analytics, VPP software can predict and address potential imbalances before they escalate into serious issues, thus providing a proactive approach to grid management.

Moreover, by integrating and optimising renewable energy sources, VPPs facilitate the transition to a low-carbon energy system, (key for utilities as they look to transition to more sustainable grid management approaches). They can manage the intermittent nature of renewables by storing excess energy during periods of high production and dispatching it when needed. This capability reduces the reliance on fossil fuel-based power plants and supports the goals of decarbonisation.

At the same time, VPPs contribute to the decentralisation of energy production, which can enhance the resilience of the power grid. In case of a localised failure, decentralised systems can continue to operate independently, thereby preventing widespread blackouts. This localised generation also reduces the load on long-distance transmission lines, decreasing transmission losses and further improving overall energy efficiency.

For utilities, in short, VPPs offer a cost-effective alternative to traditional power plants. They reduce the need for expensive infrastructure investments and maintenance associated with conventional power generation. Moreover, VPPs can participate in energy markets, generating revenue through the sale of excess energy or providing ancillary services such as frequency regulation and voltage support.

Overcoming implementation obstacles

Despite the numerous benefits, the implementation of VPPs faces several challenges. Integrating VPPs with the existing grid infrastructure requires significant coordination and investment. Utilities must ensure seamless communication and interoperability between DERs and central control systems. This involves upgrading legacy systems, implementing standardised protocols, and investing in advanced communication technologies.

Regulatory and policy frameworks play a crucial role in the adoption of VPPs. Governments and regulatory bodies need to establish clear guidelines and incentives to encourage the deployment of VPPs. This includes creating favourable market conditions, providing financial incentives for DER installations, and implementing policies that support the integration of VPPs into the grid.

In Europe, for example, the Clean Energy for All Europeans package has set ambitious targets for integrating renewable energy sources and enhancing energy efficiency. The package includes provisions for the development and integration of smart grids and VPPs. Specifically, the Renewable Energy Directive requires member states to facilitate the uptake of renewable energy through supportive regulatory frameworks, which indirectly supports the growth of VPPs.

Increasing public awareness and acceptance of VPPs is essential for their widespread adoption. Consumers need to understand the benefits of participating in VPP programmes, such as reduced energy bills and increased energy reliability. Educational campaigns, community engagement initiatives, and transparent communication can help build trust and encourage participation.

Collaboration between various stakeholders, including utilities, technology providers, regulators, and consumers, is vital to overcome these challenges. Joint ventures and partnerships can pool resources and expertise, facilitating smoother and faster implementation of VPPs. Moreover, continuous feedback loops between these stakeholders can help in fine-tuning VPP operations and addressing emerging challenges promptly.

The future of virtual power plants

Looking to the future, VPPs look to have great potential, with several key trends driving their growth. Advancements in digital technologies, such as artificial intelligence, machine learning, and blockchain, are enhancing the capabilities of VPPs. These technologies enable more accurate forecasting, real-time optimisation, and secure data exchange, further improving the performance and reliability of VPPs.

The rise of electric vehicles (EVs) presents new opportunities for these plants. EVs can act as mobile energy storage units, providing additional flexibility to the grid. By integrating EVs into VPPs, utilities can manage charging patterns, balance supply and demand, and support the integration of renewable energy.

Governments and regulatory bodies worldwide are recognising the potential of VPPs and implementing supportive policies such as FERC order 2222 in the United States. Incentives for DER installations, grid modernisation initiatives, and carbon reduction targets are driving the adoption of VPPs. Additionally, the development of energy markets and trading platforms provides new revenue streams for VPP operators.

Looking ahead, the continued evolution of VPP technology and its integration with smart grid initiatives will be key. Smart grids, which use digital communications technology to detect and react to local changes in usage, offer a natural complement to VPPs. Together, they can enhance the efficiency, reliability, and sustainability of the energy system.

Conclusion

Virtual Power Plants are revolutionising the power and utility industry by integrating decentralised energy resources into a unified and flexible network. They enhance grid stability, increase renewable energy integration, and offer cost-effective solutions for utilities.

Despite the challenges, advancements in technology, supportive policies, and growing public awareness are paving the way for the widespread adoption of VPPs. As we move towards a sustainable and resilient energy future, VPPs will play a crucial role in transforming the grid and achieving our decarbonisation goals.

By addressing the challenges of integration, regulation, and public awareness, the full potential of VPPs can be realised, leading to a more resilient, efficient, and sustainable energy system. The collaboration between utilities, technology providers, regulators, and consumers will be key to unlocking the benefits of VPPs and ensuring a smooth transition to a cleaner energy future.

Through continued innovation and strategic planning, VPPs will undoubtedly become a foundation stone of modern grid management, revolutionising the way we generate, store, and consume energy.

This transformation is not just about technology but also about creating an energy ecosystem that is adaptive, responsive, and aligned with the broader goals of sustainability and economic resilience.