Virtual Power Plants: Taming Disruptive DER (Part 2 of 2)

Posted on June 4th, 2019

Virtual Power PlantPart 1 of this article describes how the proliferation of Distributed Energy Resources (DER) has created challenges for energy companies, electric utilities and grid operators when it comes to meeting the daily demand for electricity. This second part explains the concept of the Virtual Power Plant (VPP) and how it can aid in resolving some of the issues with DER while helping improve grid operation and stability.

It’s About Value

Today, the electricity supply system is increasingly bi-directional with millions of consumers generating their own electricity, sending their excess to the grid and sometimes purchasing electricity when they need more than they can generate. The problem is that the grid operators don’t know how these millions of DER consumers will behave at any moment. This doesn’t help in addressing the basic fact that the generation of electricity must exactly equal the consumption (demand) at any instant. The Virtual Power Plant is a means to turn unpredictable DER into reliable, controllable and valuable assets for utilities and grid operators.

Many Small, Coordinated Contributions

The Virtual Power Plant shares several characteristics with another electricity-related program: Demand Response (DR). Both VPP and DR rely upon financial incentives to get electricity customers to simultaneously act in a manner beneficial to the utility and grid. With Demand Response, each customer turning their air conditioning up a few degrees or turning off an appliance for a couple of hours is very small compared to the total electrical demand. However, when hundreds of thousands of customers can be coordinated so as to reduce their electrical usage a little bit at the same time, the result can be hundreds of megawatts in peak electricity demand reduction.

The Virtual Power Plant

DER owners can be coordinated in the same way as Demand Response participants, but DER owners can work together to create a much more valuable VPP. It is the ability to deliver large amounts of generated or stored electricity to the grid along with simultaneous demand reductions that makes the VPP a valuable asset. The aggregation of thousands of DER owners with wind, solar, co-generation, battery or thermal energy storage or other energy resources into a VPP can:

  • Reduce on-site electrical consumption (e.g. self-consumption of DER electricity)
  • Provide excess DER-generated electricity to the grid (e.g. excess wind or solar)
  • Store excess DER-generated electricity when not needed by the grid (e.g. battery, thermal or chemical storage)
  • Store excess electricity from the grid (e.g. battery, thermal or chemical storage)
  • Increase DER electrical generation when requested (e.g. natural gas generation)
  • Release electrical energy stored in batteries to the grid to help meet the electrical demand
  • Use stored thermal energy to reduce on-site electrical consumption (e.g. ice storage for chillers)
  • Use stored hydrogen in fuel cells to provide electrical energy to the grid, and
  • Capture heat from electricity generation to reduce overall energy consumption (e.g. combined heat & power).

Benefits of a VPP

What makes a Virtual Power Plant valuable depends on one’s perspective. For grid operators and utilities, a VPP can provide a guaranteed amount of electricity when needed which helps reduce the need for new power plants. For DER owners, participation in a VPP can offer new or increased revenue generation from generating and storing electricity they might not have when operating alone. Like Demand Response programs, attractive financial incentives for the members are all-important to developing and maintaining participation in a VPP.

Where Are All the VPPs?

A subsidiary of the Norwegian Utility, Statkraft, has a 10,000 MW Virtual Power Plant operating in Germany and made up of 1,300 wind farms plus 100 solar energy, hydropower and bioenergy producers. Significant VPPs are found in numerous other countries as well. So, why don’t we see similar efforts in the U.S.?

There is a great deal of interest in VPP in the U.S. and various research reports predict 19% to 28% compound annual growth in the VPP market. To-date, however, many of the VPP efforts in the U.S. have been small and oriented toward residential consumers. Most often, the roadblocks to VPP in the U.S. are regulatory in nature rather than financial or technical.

It’s easy to understand the significant coordination and communication challenge a VPP represents. DER owners can have substantially disparate capabilities, capacities, operating periods and limitations. The VPP manager must account for all of these differences along with daily, weekly and yearly demand variations and weather forecasts. Adding the regulations of multiple utilities, grid operators, states, cities and even local agencies can make a VPP unfeasible.

One New York utility entered into agreements with several vendors to develop a small-scale VPP for proof-of-concept. The VPP was based upon the installation of residential battery storage systems. The local fire and buildings departments, however, deemed they did not have the appropriate regulations in place to permit the installation of Li-ion battery storage systems. After several years of delay, the utility had to suspend the project.

Your VPP

While waiting for more VPPs to be developed in the U.S., it’s a good time to protect your investment in your facility. That means having it assessed for optimum energy usage and potential energy-saving repairs and upgrades. Depending on your location, DER or a microgrid may help mitigate rising electricity prices and impending emissions regulations.

Equans MEP Services has microgrid and DER professionals in-house to help you develop and implement a comprehensive energy and sustainability strategy, including one for joining a VPP. From various types of energy audits, to equipment agnostic energy solutions and financing, rebates and incentives, we work with you to satisfy all of your energy needs.