Whether in the US, Europe, or the UK, the value of virtual power plants (VPPs) is becoming increasingly clear, as more distributed energy resources (DERs) connect to the grid. Here’s are some of the key things you need to know about the value they bring to the grid.
1. Virtual Power Plants aggregate and deliver value from DERs
Virtual power plants (VPPs) aggregate DERs. A traditional power plant delivers energy from just one resource; VPPs can access, aggregate, coordinate, and optimise many resources.
The second distinct function of a VPP is that those resources are then traded and treated like a single asset. This is particularly important in how network utilities can orchestrate the value of those DERs. Their flexibility is sold into markets, delivering additional resources to the grid.
VPPs are therefore a function of those two component parts: aggregation and then trading the energy resources as a single unit. In other words, using the aggregation like a power plant.
2. The use of these aggregations is expanding nationally in Europe
In the UK and Europe, VPPs were originally deployed in micro-grid use cases. Small communities or island parts of the network, located away from generation assets, being able to self supply, using a mixture of local generation and controllable demand.
From there came the idea to apply this concept at a larger scale, coordinating DERs across the whole network. In the UK and Europe, regulatory changes are now even allowing aggregated resources to play into national wholesale markets.
In the US, FERC 2222 is playing a similar role to streamline the participation of VPPs and DERs, aiming to do so with less friction and at increased value. It allows DERs to participate on a level playing field in existing power markets alongside traditional energy resources.
3. VPPs traditionally coordinate and trade one type of energy resource – but that’s changing
VPPs tend to comprise a certain type of energy asset. For example, one may aggregate electric vehicles, while another may focus on aggregating and optimising solar PVs and battery storage. This aggregation of single asset types is the first iteration of a VPP.
Now, VPPs are starting to push the boundaries, to include and trade a broader range of assets. Flexibility market platforms like Electron’s ElectronConnect are already used as a tool in Europe and the UK, to optimise the use of different types of assets within a single VPP. This same concept can now benefit utilities in the USA.
Just like the UK and Europe, the USA energy system is reaching an inflection point, with a rapid increase in the number of low carbon technologies that are connecting the grid.
Network utilities and implementers tend to coordinate those DERs through numerous incentive programmes. These programmes include onboarding and enrolling VPPs, as well as the measurement and verification, and settling and paying invoices.
This is done programme by programme, with duplication and manual data entry creating friction for both the demand response providers and programme administrators.
This is where a neutral market comes into play.
4. Neutral market platforms can help VPPs scale their activities and reduce wholesale costs
Currently, each DER operator needs to jump through hoops to access the individual programmes, with different enrolment criteria, data standards, and APIs.
Utilities also suffer from a lack of visibility when maintaining and managing multiple programmes, across different technologies.
A neutral market for low carbon flexibility can simplify this complexity. Those markets introduce a set of rules, common standards, and processes. Combined, these make it easier for multiple types of DERs to participate – whether it’s through VPPs or directly.
DERs can therefore see where the opportunity is, giving all participants better visibility across multiple programmes and multiple geographies.
In other words, markets create more standardisation in the user experience, on all sides.
Using the capacity on the grid more efficiently through VPPs therefore justifies connecting DERs more quickly. This is vital as the world moves towards decarbonised power systems.
Aggregating more DERs and trading them into traditional markets and flexibility markets also means that network utilities can start to offset wholesale costs. In the US, that means that a utility’s resource adequacy (RA) can be reduced by using the energy from a VPP.
The energy transition requires physical upgrades to the grid but those are costly and will take time. Leveraging tools like VPPs at scale, through neutral markets like ElectronConnect, means network utilities can have an immediate impact – making smarter use of the existing grid and delivering the energy transition at the lowest cost for consumers.
