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 &mdas
>”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,” said Navigant senior analyst Peter Asmus in a market report. 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.
Asmus called VPPs “an ideal optimization platform for the coming transformation of the power grid,” adding that both supply and demand flexibility will be increasingly necessary to accommodate fast ramping periods and address corresponding supply forecast errors.
German utility RWE began a VPP in 2012 that now has around 80 MW of capacity. According to Jon-Erik Mantz, commercial director of RWE Energy Services in Germany, in the near future flexibility will become a commodity. Virtual power plants generate additional value from the flexibility they can offer the grid, he said-so, for RWE, “this is why we concentrate on building VPPs.” As large utilities’ market share falls in response to growing self-consumption, he said, utilities can still “be part of a VPP and profit.”
Dr. Thomas Werner, senior key expert in product lifecycle management at Siemens, said that in order to integrate diverse smaller energy sources, “You need an energy management system with good data models which represents energy resources on the one hand and, on the other, the energy market environment.” Werner believes VPPs fulfill these conditions and are the best way to integrate a growing number of power sources into the grid and the market.
“VPPs can be handled like other conventional generation,” he said. “They can target different energy markets and regulatory environments. They can play as important a role as conventional concentrated generation.”
“No Real Competition”
“From my point of view, there is no real competition for the VPP concept,” Werner said, pointing to VPPs’ use of cheap and ubiquitous information and communication technologies, while other technology trends like building energy storage systems incur comparatively heavy costs. VPPs can also avoid expensive installation costs in, for example, a home system, he notes. Self-consumption for home or industrial use is hampered by having to produce “the right amount of power at the right time.”
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.
For example, explains Werner, if one wind 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.”<