APR 22, 2020
The market drivers for virtual power plants (VPPs) have evolved over time, tracing both the growing sophistication of control and optimization technologies and market structures breaking down what were previously silos in operations and planning for power grids. For a VPP today, it doesn’t matter if an asset is supply or load or storage (or an EV). If it can be sensed, touched, and controlled, it is an eligible asset to address the needs of the larger grid—in real-time—while still providing localized value for the asset owner (as long as market structures allow such bidirectional transactions).
While an experiment a decade ago, VPPs are emerging as vital opportunities in key markets globally. Leading software providers can now stand up commercially viable platforms that have become a necessity in regions of the world featuring massive growth in distributed energy resources (DER), accelerating a dynamic vision of our infrastructure future that Guidehouse touts as an emerging Energy Cloud.
VPPs Offer Variety of Services for Wholesale Markets
Several technological evolutions are contributing to making VPPs a viable solution for DER management with a special focus on smoothing out of variable renewable energy generation. These include a shift to a neural grid of intelligent and granular telemetry, market structures that allow trading between retail and wholesale markets, and continued growth in Internet of Things, particularly at residences as VPPs expand to include ever widening pools of previously ignored DER assets. Instead of relying on centralized fossil generators to help integrate large-scale renewable energy asset fleets, VPPs enable DER assets to perform the same renewables integration at a lower economic and environmental cost.
The types of ancillary services that VPPs and related platforms (such as distributed energy resource management systems, or DERMS) could provide to wholesale markets are enabled by innovative aggregation and optimization at the distribution level of power service. Among these ancillary services are demand response (DR), frequency regulation, and voltage control. As DER pools increase over time, surpassing our reliance upon centralized generation sources, VPPs will become the glue that holds the grid together.
AutoGrid, a Silicon Valley-based software developer, is building a project it claims to be the largest VPP in the world in Japan. The developer recently garnered the top ranking spot in a new VPP Leaderboard report. AutoGrid’s evolution is just one example of how companies in this space are expanding beyond utility DR programs and investigating new opportunities in deregulated markets, where the focus is on quicker sales cycles and ROI rather than regulated revenues. This theme is echoed by many other vendors including Centrica REstore, Enbala, and KiWi Power, each also a market leader in this space, each also widening the pool of DER assets and use cases embedded within the VPP platform.
Partnerships Are Key to Success
Just as Enbala found ABB, AutoGrid has developed a key partnership with Schneider Electric (which also recently invested in the company). A newly released combined solution integrates Schneider Electric’s EcoStruxure ADMS with AutoGrid Flex. This solution is linked to both VPP and DERMS applications and includes modeling, forecasting, optimizing, and orchestrating the full range of behind-the-meter (BTM) DER assets. The company is gaining traction outside of its core client base of utilities, poised to help scale up VPPs.
Challenges to full-scale commercial rollouts of VPPs remain. Among them are lack of widespread reliance on dynamic, real-time pricing. VPPs are highly dependent on regulatory constructs, utility structures, and efforts to reform electricity markets, as highlighted in a recent survey performed by Guidehouse in collaboration with Public Utilities Fortnightly. The overarching barrier to the VPP is that the rules of engagement are in transition, but the rules are also bending and trending in the direction quite favorable to future VPP growth.