Balancing supply and demand is critical to maintain a reliable electricity grid. Virtual Power Plants (VPPs) present an innovative and alternative solution, enabling local grid operators to use energy flexibility to ensure a more stable supply, improved energy efficiency and enhanced grid capacity.
The potential for virtual power plants
With the energy sector focusing more on renewable forms of energy and distributed energy resources (DER), VPPs are attracting more attention, able to deliver value to customers, and the potential to offer huge benefits to DER installers, grid operators and utilities.
Drawing on the capacities of a range of energy sources, such wind turbines, solar panels, and electric vehicles, together with battery storage and other assets, the cost of implementing VPPs can be much lower when compared to traditional power plants. Controlled by grid operators or third-party aggregators, these energy resources can be monitored and optimised with bi-directional communications between components for a more efficient and resilient power grid.
Looking to a less carbon-intensive energy future, VPPs could play a key role in providing resource adequacy and other grid services at a negative net cost to the utility.
The global market for VPPs was expected to grow to $2.36 billion in 2023 at a compound annual growth rate (CAGR) of 22.5%, according to the Virtual Power Plant Global Market Report 2023. Despite geopolitical issues, rising commodity prices and supply chain disruptions, the market is expected to reach $5.04 billion by 2027 at a CAGR of 20.9%.
As a member-led industry alliance, we can see momentum shifting already. With major players in the VPP sector focusing on the adoption of advanced technologies and open standards, which is helping to drive growth. Partnerships will be key to this growth, as utilities and energy providers collaborate with technology companies and device manufacturers to turn homes, workplaces, and communities into virtual power plants.
Two companies, Swell Energy and SunPower, are playing their part in this transformative shift, having established VPPs that offer new value to utilities and their customers.
Making waves in Hawaii
Swell Energy creates VPPs by linking utilities, customers and third-party service providers together, and by aggregating and co-optimising DER through its software platform. The VPPs provide a variety of grid service capabilities through projects in Hawaii, California, and New York, so utilities can deliver cleaner energy to customers and reduce dependence on fossil fuels.
The project in Hawaii, where Swell is working with Hawaiian Electric, represents a major advance in aggregated battery storage management technology. It will co-optimise batteries in 6,000 different homes to create a decentralised power plant for the local utility on three Islands. The program will deliver 80 megawatts hours of grid services using OpenADR-based integration, including capacity reduction, capacity build and fast frequency response to the three island grids, while also reducing bills and providing financial incentives for participating customers.
The VPP tackles several challenges, driven by Hawaiian Electric’s need for energy storage and renewable generation through DER, along with capacity and ancillary services to ensure adequate supply and system reliability across its service territory.
Futureproofing energy supplies
VPPs are also futureproofing energy supplies. Hawaii became the first US state to commit to generating 100% of its electricity from renewables by 2045, which means replacing fossil-fuelled plants with sustainable alternatives. While Hawaii has plentiful sunshine, grids can become saturated with solar production at midday, requiring batteries to store the surplus and make it available after the sun goes down.
Swell Energy will supplement Hawaiian Electric’s energy supply by relieving the grids of excess renewable energy as production spikes and absorbing excess energy when needed, reducing peak demand and providing 24/7 response to balance the grids. The renewable energy storage systems collectively respond to grid needs dynamically.
The model is a win-win. It provides homeowners with backup power and savings on their energy bills. At the same time, battery capacity is available to the utility to deal with the challenges of transitioning to a much cleaner energy source. This requires balancing grid needs while ensuring that customers are backed up and compensated.
Rewarding customers in California
Global solar energy company SunPower’s VPP platform interfaces with utility DERMS platforms to ensure its customers’ SunVault storage systems are charging and discharging in line with the needs of the utility grid. The goal is to enroll customers in the program, dispatch according to the utility’s schedule, handle customer opt-outs and report performance data to the utility. As SunPower is a national installer, it must be able to communicate with dozens of utilities across the country.
The company also announced a partnership with OhmConnect to provide a new VPP offering for SunPower customers in California. Homeowners in selected locations with solar and SunVault battery storage can now connect with OhmConnect directly through the mySunPower app to earn rewards for managing their electricity use during times of peak demand. The idea being to make it as simple as possible for customers, putting them in full control of their energy use.
The future potential of virtual power plants
VPP programs like these demonstrate how to balance energy supply and demand on the network by adjusting or controlling the load during periods of peak demand, supporting the health of the grid, absorbing excess renewable energy, and much more.
Companies are already showcasing the potential capabilities of an advanced, distributed, and dispatchable energy future. But there are a relatively small number of initiatives globally. With the technology and communications standards to support it available, we need more opportunities like this to drive greater adoption and participant enrolment.
The timing has never been more important as we look ever more closely at an energy future that relies less on fossil fuels. With growing demands on the grid, especially in densely populated cities and with increasingly extreme weather events – VPPs offer an attractive solution.
But it’s up to utilities, energy companies and partners to work together and embrace change, with governments supporting and driving change through regulation.
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