Almost 4GW of virtual power plants are in operation worldwide, Navigant says

Tesla's 2015 Powerwall launch made significant mention of the potential for use in VPPs, but it took some time for the market to catch up. Image: SolarCity-Tesla.

Navigant Research has created a definition for virtual power plants (VPPs) in the course of creating a market report which finds that nearly 4GW of such projects are already in operation, with rapid growth forecasted over the next decade.

Research director Peter Asmus - a previous guest blog and technical article contributor to this site - and senior research analyst Roberto Rodriguez Labastida said that there is currently a “wide divergence” in understanding of what constitutes a VPP.

The term is generally considered to mean a configuration of distributed energy resource (DER) assets deployed behind-the-meter in such a way that they are able to provide the same services as large generators in balancing the grid, for example. However the looseness of the definition means that the term has been applied to Stakraft’s 1GW UK 'VPP' which includes batteries, solar and gas generators, while for many the term implies the aggregation of multiple residential and small commercial projects acting in concert as seen in various parts of the world. As such, the Navigant researchers came up with the definition below for the purposes of analysis and forecasting:

A VPP is, the authors wrote: “A system that relies upon software and a smart grid to remotely and automatically dispatch retail DER services to a distribution or wholesale market via an aggregation and optimisation platform.”

As seen just today in my Editor’s Blog on developments in the behind-the-meter space in Australia, electricity market regulators are quickly waking up to the potential of using distributed, small systems to perform the role of ageing, bulk generators in delivering services such as frequency regulation.

At the same time, the purchase of German energy storage company Sonnen by Royal Dutch Shell appears to be evidence that even big incumbents in the energy industry are starting to wake up to the fact that solar-plus-storage can be much more than the sum of its parts. Sonnen has already acquired pre-qualification to use 5MW block of aggregated systems to deliver some frequency control services in its home country.

“Formerly passive consumers” can become “active prosumers” through participation in a VPP, allowing for the trading of energy, demand response and in other ways becoming “active participants in delivering services tailored to their needs and preferences that also serve the larger grid,” the Navigant team wrote.

From expected annual market revenues in 2019 for VPPs of around US$174.7 million, Navigant predicts a “surge” to a cumulative US$6.2 billion by 2028 at a compound annual growth rate (CAGR) or 48.6%. From 2019’s installed capacity, which Navigant claims to be at 3,973.5MW, the VPP space will constitute 34,465.7MW by 2028, the research firm forecasts.

It’s also worth noting that Navigant identified three distinct VPP segments: demand response VPPs which ramp down demand across loads on a network in response to network peak events; supply-side VPPs, which use smart grid technology to piece together a “portfolio of typically diverse resources” which are then used to “mimic services that a conventional 24/7 coal or nuclear plants would provide, while the third and final VPP segment consists of mixed-asset VPPS, which bring generation, load and energy storage together to provide a synergistic sharing of grid resources to squeeze out more value, reducing capital costs.

The latter, mixed-asset VPPs, can be considered “the goal for VPPs” in the way that they bring all of these things together, Navigant said.

“This segment has been showing dramatic growth over the past 2 years and is emerging as the VPP platform of choice. Mixed-asset VPPs represent the epitome of a VPP. On this platform, any node on the grid represents a potential solution to both regional distribution networks and wholesale transmission grid pool supply and reliability challenges,” the authors wrote. 

Image: Navigant Research.

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