Virtual power plants coming into their own

08 July 2021 |

Last two years have seen a rapid growth of ‘virtual’ power plants (VPPs) across the world. A VPP is an aggregated portfolio of distributed energy resources including storage and rooftop solar systems that mimic an actual power plant to provide grid services such as peak load management, grid balancing and fast frequency response. Each distributed resource is centrally controlled via an aggregation software and operated by a service provider or distribution utility. The assets respond to signals from grid operators to inject or withdraw power as needed in a very short amount of time, a span of minutes or even seconds. At the same time, the assets continue to serve their primary role of power supply, backup and energy storage for the owners.

Figure 1: Virtual power plants configuration and benefits

Source: BRIDGE TO INDIA research

VPPs are gaining in popularity across the USA, UK and Australia as power grids increasingly need more flexibility to absorb growing capacity of variable renewable power. Pools of small-medium sized distributed generation systems, located closer to load centres, are best placed to provide system decongestion, frequency support, system upgrade deferral, balancing and ancillary services at a competitive cost. For service providers and owners of the distributed assets, the additional income streams can optimise original investment and enhance returns.

As an example, US-based Sunrun, a leading installer of residential rooftop and storage systems, has signed a contract with the utility Southern California Edison to provide 5 MW capacity for peak management and grid balancing services. Similarly, Green Mountain Power, a US utility, implemented a pilot VPP of 13 MW capacity across 2,567 residential battery storage systems to manage peak demand and provide power backup services. The project saved USD 3 million for the utility over nine months from January to September 2020. In January 2020, Centrica, UK’s gas utility, partnered with battery manufacturer Sonnen to create a VPP comprising 100 residential systems to provide frequency response services to UK’s transmission system operator. VPPs are also being proposed in distributed solar heavy grid of Hawaii to balance the grid.

In the Indian context, C&I renewable developers would be the ideal VPP service providers. While high capital cost has been a key deterrent in adoption of battery storage, the ability to realise additional income streams through VPPs could kickstart the distributed storage market. Recently issued draft ancillary services regulations allowing energy storage to provide ancillary services to the grid also provides hope for VPP prospects.


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