Making virtual power plants a reality

The hot topic in the UK energy industry is the transformation from a centralised system, based on a small number of large power stations, to a decarbonised, decentralised and digitalised system, with a large number of technologies generating, storing and managing the demand for energy. These are located on commercial property, fields, homes or wherever feasible.  

But how can all this energy from so many diverse sources be harnessed, brought together and used most effectively to support the grid, rather than place a strain on it? 

A new model for clean energy integration

There is no single set design for VPPs, and markets are developing in various countries, including the UK, Japan, the US and Saudi Arabia

A virtual power plant (VPP) or platform is a cloud-based data control centre that aggregates generation data from various distributed energy resources – including, but not limited to, wind, solar PV plants and battery storage facilities.

These data centres use various communication technologies and sensors to gather information, allowing the production of each asset to be monitored and controlled. By integrating several sources, VPPs enable a reliable power supply from a multitude 
of sources, meaning the operator of the VPP can aggregate the energy generated and trade with wholesale markets.

There is no single set design for VPPs, and markets are developing in various countries, including the UK, Japan, the US and Saudi Arabia. In Australia, state governments have been working with energy companies to turn entire urban areas into VPPs. In South Australia, for example, the government will potentially install up to 50,000 household solar and battery storage systems and connect them to form a VPP. Earlier this year, it awarded a contract to Tesla to trial this concept with 250MW of solar energy and 650MWh of battery storage.

In fact, the global market for VPPs is expected to be worth up to US$1.2bn by 2023, growing at 30% a year according to US-based analyst P&S Market Research. 

Key factors driving the growth of the burgeoning VPP market include increasing infrastructure development in Asia Pacific and more government initiatives to reduce carbon footprints.  

Opening up the UK energy market

Limejump is one company pioneering this technological revolution in the UK. On 9 August 2018, the Limejump VPP became the first to trade an aggregated balancing mechanism unit (BMU) in the UK balancing mechanism, helping the National Grid to balance the frequency. This was the first time a VPP had been permitted to take part in this market.

Each site in the VPP is connected via hardware which allows Limejump to receive performance data back from each individual asset. Machine learning is utilised to look at all performance aspects of the asset – for example the wind speed and height of a wind turbine. This can calculate how much energy each asset will generate per half hour, which is then aggregated to be in competition with generation from a larger power station.

As well as cloud-based analytics, the VPP is comprised of smart connective devices, a full shift trading desk, a commercial and billing platform and customer portal.

A VPP supports decarbonisation efforts by allowing multi-scale and intermittent generation access to revenue streams that would otherwise be out of their reach. 

This market access increases the viability of renewable resource development and storage asset investment and creates confidence for investors to create new development. This replaces a requirement for new large-scale carbon pollutant generation to balance the grid.

The potential for this technology in the UK is significant. But to really build the market for VPPs, the rulebook needs to be rewritten

Towards a new reality

The potential for this technology in the UK is significant. But to really build the market for VPPs, the rulebook needs to be rewritten from one designed for large, centralised carbon-based power stations, to one that accommodates the new realities of the energy system demands.

Regulator Ofgem and system  operator National Grid are already working on this, and a series of reforms are underway. Limejump’s pioneering entry into the balancing mechanism over the summer was the result of Ofgem revising rules stipulating that data on BMUs submitted to National Grid could only go through one grid supply point.

However, it remains the case that assets are not permitted to participate in the balancing mechanism and frequency response market simultaneously. Interim solutions have been proposed to allow standalone battery BMUs and aggregated BMUs to bid through a specially created framework. This will be permitted from February 2019, with a more permanent solution developed towards the end of the year.

The capacity market would benefit from changes to further accommodate aggregators that would incorporate VPP structures. At the moment, it is categorised by particular types of generation or demand side response, but contracts designed to provide an indication of the number of megawatts required would be more insightful. These ideas have been shared within the government’s five-year review of the capacity market (though the mechanism is currently at a standstill until the government can resolve a dispute in The European Court of Justice).  

The future of energy

Generally, it would be beneficial if market transparency was increased by working with aggregators to determine which ancillary services count towards specific markets, what its decision-making criteria are for each market and how much power they are intending to purchase through the year.

Embracing technology and allowing innovators to propose new solutions to market change, rather than its current agnostic methodology to create a suite of different products, would then be available to de-risk the energy market. Aggregators are well placed to adapt to market forces as required, using flexibility and boosting the market for VPPs even further.

The future for VPP structures is evolving as the need for renewable and sustainable solutions increases in the UK. However, the opportunities for VPPs to play a major role in the future of energy has global applications. 

Image credit | iStock