Virtual Power Plant
Sectors:
The increasing usage of renewable energy raises the risk of unpredictable energy generation drops or peaks. A virtual power plant reduces these risks by aggregating several small production units. Besides balancing (unpredictable) sustainable energy supply and demand in neighbourhoods, it improves the yield of energy generation units as it enables households to store and/or trade surplus energy. A virtual power plant incorporates energy generation units, load and battery systems. As an online platform, the virtual power plant aggregates people’s production and consumption of energy and stores the surplus locally. Due to this aggregation, it’s possible to trade energy on the wholesale markets: the use of a home battery lets you store energy when electricity prices are low and discharge the battery when there are high. Overall the virtual power plant is able to monetize flexibility and minimizes the risk of shortages in supply by using a different set of functions.
The increasing usage of renewable energy raises the risk of unpredictable energy generation drops or peaks. A virtual power plant reduces these risks by aggregating several small production units. Besides balancing (unpredictable) sustainable energy supply and demand in neighbourhoods, it improves the yield of energy generation units as it enables households to store and/or trade surplus energy.
Main Benefits
Reducing Operation Costs
Enhances Grid Stability
Improving Energy Supply Efficiency
Reducing energy bills
Functions help you to understand what the products can do for you and which ones will help you achieve your goals.
Each solution has at least one mandatory function, which is needed to achieve the basic purpose of the solution, and several additional functions, which are features that can be added to provide additional benefits.
Mandatory Functions
Products controlling the local generation of energy through renewable sources
Products managing the energy consumption time-wise and for several devices through an ICT-infrastructure
Products enabling the communication between the virtual power plant and the grid to receive and sell energy
Potential Functions
Business Model
Implementation Facts
Average Implementation Time: approximately 0.5 - 1 years
Market Overview
The virtual power plant market will grow from less than US $1 billion per year in 2013 to $3.6 billion annually by 2020, according to Navigant's research. One reason, therefore, is the increasing spread of renewable energy sources, which requires an increased grid flexibility. (Navigant, 2014)
Marketable Outcomes
The marketable outcomes of a virtual power plant are mainly
- monetary benefits in optimising the energy usage depending on varying prices,
- the increased security of energy supply,
- sustainability and
- the grid stabilisation
Implementing the solution without storage, the own energy usage of a residential energy generation system (with equal yearly production and consumption) can be reduced approximately 30 %. With a battery, it is possible to upgrade the savings of 30 % own use to potential energy savings of 60 %. Anyway energy losses by the system need to be accounted.
The implementation of a virtual power plant changes the structures of the energy market. The current energy regime is a top-down system. Energy suppliers own production units and thereby are in possession of power and benefits. In a bottom-up energy system the virtual power plant enables the power shift from energy suppliers to prosumers: creating revenues and possibilities for end-users on a level playing field with energy suppliers. (City-zen, 2016)
Functionalities:
The graphic below shows the main assets of a virtual power plant. Through a computational system, all impacts on the virtual power plant are monitored and controlled. As visible in the graphic, the system depends mainly on the energy markets, the external data and the decentralized energy producers and consumers.
Driving Factors
Supporting Infrastructure
Some necessary or additional features of the solution might already be installed in some areas, all the infrastructure named below can also be installed partly or as a whole within the implementation of the virtual power plant.
- ICT infrastructure as smart meters or smart grids to enable the communication and optimization of the generation systems, the consumptions and the grid
- Home batteries to enable the storage of energy
- Local renewable energy generation systems, such as private solar panels
Government Initiatives
- Horizon 2020 Societal Challenge "Secure, clean and efficient energy" to the focus area "Building a low-carbon, climate resilient future" (European Commission: Horizon 2020)
- A supporting governmental initiative for virtual power plants in future, which is already discussed in some European cities, is to promote open protocols for battery system (City-zen, 2016)
Legal Requirements
Regulation
- IT-security regulations
- Market regulations need to have variable energy prices available for consumers
- Net metering has a negative effect on the business case of the virtual power plant
Use Cases
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