Virtual Power Plants – the commercial answer to integrating distributed PV microgeneration?

Virtual Power Plants

On the face of it, the uptake of domestic solar PV may appear to have been a roaring success. In the UK for example, the record for the proportion of power generated by solar is 28.5%, with almost a million households owning solar panels. However, since 2016, UK domestic solar capacity has virtually flattened out with new installations dropping and many solar manufacturers going bust. The reason for this is the dramatic reduction in subsidies accessible to domestic generators through the feed-in tariff scheme which guarantees a fixed rate of income for energy exported to the grid. With these subsidies having been reduced dramatically, and set to be axed entirely this April, the only revenue available to customers from the energy they produce is what they save on their own electricity bill. How can householders continue to invest in solar PV when there is no guarantee that these cells will pay for themselves?

The answer may be for domestic producers to allow customers to compete with traditional generation by selling their power to other consumers. At the moment, this would not be possible under the present hierarchy of capacity and wholesale markets which set lower bounds on the size of generation allowed to compete. However, the growth of aggregators which integrate a number of distributed generation assets into one “virtual power plant” presents an opportunity for behind-the-meter generation to take the next step towards long-term commercial viability.

This innovation is being made possible by a number of technological developments, the first of which is the growth of the cloud. Control systems which exist in the cloud are now able to manage a large number of assets and bundle their power together. This control allows these virtual power plants to behave, in relation to the capacity market, as one reliable source of generation which can be accessed as if it were a traditional power station.

This use of low-voltage domestic generation also makes sense in thermal efficiency terms. At present, much of the domestic electricity consumed is initially generated at high temperature and voltage and then transported long distances.  Power of this quality is only really required in high density industry – for homes and commercial properties the power generated at low temperature is sufficient.

This also provides a new opportunity for distribution network operators. As potential managers of these power plants they could earn money for developing and operating these systems – mitigating the potential erosion of their business model from high volumes of ‘prosuming’ customers defecting from the grid.

The future of virtual power plants may be in the growth of blockchain. These distributed ledgers would allow the peer-to-peer trading of electricity by domestic generators and consumers, thereby creating a distinct marketplace working in parallel with traditional marketplaces. This would also allow smaller power plants to be developed to trade directly over the cloud.

The potential benefits of virtual power plants are numerous. Beyond the previously set-out commercial aspects, distributing the supply of generation also increases the security of supply and makes the grid less vulnerable to outages and extreme events. Perhaps most importantly, the development of VPPs introduces more competition to the energy market, leading to the best outcome for customers while promoting the growth of clean generation.

DER-SmartGrid Integration 2019 (London, 14-16 May) brings together 120+ experts for a case-study driven programme addressing the strategic, commercial, and technical challenges posed by the uptake of DERs. Please visit www.smartgrid-forums.com/forums/der-smartgrid-integration-2019/ for more information.