Today’s global energy market is in the midst of a paradigm shift, from a model dominated by large centralized power plants owned by big utilities to a mixed bag of so-called distributed energy generation facilities — smaller residential, commercial and industrial power generation systems — many of which use renewable resources.
The boom in smaller installations, which are benefiting from new technological developments and business models, is undermining the traditional advantages associated with building large centralized power generation, such as economies of scale. For example, self-consumption, where consumers become producers of their own power (or “prosumers”), has caused major utilities to respond with new business models designed to keep those consumers as customers.
Virtual Power Plants
One distributed generation technology with significant growth potential is the virtual power plant (VPP). In the VPP model an energy aggregator gathers a portfolio of smaller generators and operates them as a unified and flexible resource on the energy market or sells their power as system reserve.
VPPs are designed to maximize asset owners’ profits while also balancing the grid. They can match load fluctuations through forecasting, advance metering and computerized control, and can perform real-time optimization of energy resources.
“Virtual power plants essentially represent an ‘Internet of Energy,’ tapping existing grid networks to tailor electricity supply and demand services for a customer,” The VPP market will grow from less than US $1 billion per year in 2013 to $3.6 billion per year by 2020, according to Navigant’s research — and one reason is that with more variable renewables on the grid flexibility and demand response are becoming more crucial.
VPPs can deliver needed energy at peak usage times, and can store any surplus power, giving the energy aggregator more options than would exist in a single power plant. Other advantages include improved power network efficiency and security, cost and risk savings in transmission systems, increased value from existing infrastructure assets and reduced emissions from peaking power plants. And, importantly, VPPs can also enable more efficient integration of renewable energy sources into the grid by balancing their variability.
if one solar power source generates a bit more energy than predicted and another generates a bit less, they will compensate for each other, resulting in a more accurate forecast and making it easier to sell the capacity in the market or to use it in power systems operation. A VPP can also combine variable renewable power sources with stable, controllable sources such as biomass plants, using the flexibility of the biomass source to smooth out any discrepancy between planned and actual production.
How a VPP Works
A Virtual Power Plant aggregates different types of energy generation and controls it as if it was one source. Credit Siemens
source: RE world