Ask An Expert: The Fundamentals of Virtual Power Plants & Where They Might Go Next

Virtual power plants (VPPs) have remained in the public zeitgeist for years now, transitioning from a buzzword concept to a practical reality. Through the use of a distribution energy resource management system (DERMS), utilities can aggregate and deploy otherwise disparate distributed energy resources (DERs) like solar, batteries, EVs, and smart home technologies like thermostats and water heaters to meet load management needs. Virtual power plants are already helping utilities to enhance grid resiliency and defray high peak energy costs, which is how, according to the U.S. Department of Energy, VPPs were able to generate between 4-8% of peak electricity demand nationwide.

In our latest Ask an Expert series, we sit down with our Director of Emerging Technologies, Dr. Greg Ledva. Greg’s academic and professional background has proven instrumental in his work at Virtual Peaker helping us to develop the very best demand flexibility technologies possible. For our first interview with Greg, we’re talking about the fundamentals of virtual power plants to help our utility partners new and old meet demand while saving on expensive peak energy market costs.

How would you describe a virtual power plant to someone outside of our industry?

Dr. Greg Ledva: A virtual power plant is any ability to control smaller resources simultaneously to achieve a collective adjustment to the group of resources’ total power. This adjustment could be an increase in demand (power consumption from the grid), reduction in demand, increase in generation (power injection into the grid), or decrease in generation. There are many different definitions and interpretations, but they are mostly all variations of this fundamental capability. As a bonus description, distributed energy resource management systems (DERMS) are necessary to control the resources that make a virtual power plant.

How have virtual power plants benefitted utilities already?

GL: The most straightforward answer is in peak shaving. The ability to change the demand of a collection of resources allows utilities to reduce their peak energy usage, which is typically the most expensive period for them to obtain enough generation to meet that demand plus any reliability margins. Peak shaving also helps with utilities that have to deal with a demand charge, where costs are allocated to them based on their portion of the demand during a period when their system operator sees the highest demand in a period. The period could be annually, monthly, or monthly during certain seasons, for example.

There have also been examples of using energy storage for something called non-wires alternatives. This use case is more localized flexible resource control where a utility tries to limit the power flow through power system equipment, like a distribution system transformer, to defer upgrades or extend the life of the equipment. It mainly focuses on devices on a part of the distribution system downstream from the equipment, whereas peak load shaving uses devices across the utility’s service territory.

What types of devices can be used in a virtual power plant?

GL: For residential sites, the best types of devices are those that store energy directly or devices that store energy by changing the temperature of something (called thermal loads). Batteries and EVs store energy directly. Sites with heating, ventilation, and air conditioning (HVAC) equipment, water heaters, and fridges are examples of devices that store energy by consuming power to change the temperature of a medium (e.g., the water in the tank for water heaters or the air in a house). These resources are useful because changes to their power consumption take a while to impact the end user, and so there’s an ability to “hide” the adjustment without impacting the end user’s experience with the system that you’re adjusting.

What’s your current understanding of the promise of VPPs? How do you see it as moving beyond today’s aggregation of DERs?

In the long term, I see virtual power plants as a viable resource in system operator resource stacks everywhere. We have a saying here, that we want to “make demand as controllable as a gas turbine generator.” It’s a realizable goal, where collections of devices (loads, storage, and generation) can be coordinated to do essentially anything that a power plant can do.

We have a saying here, that we want to “make demand as controllable as a gas turbine generator.” It’s a realizable goal, where collections of devices (loads, storage, and generation) can be coordinated to do essentially anything that a power plant can do.

Some of the limitations on how fast devices can respond, what information is obtainable from a device, or what actions devices can take are only limited by the communication infrastructure and functionality in components. For example, inverters could inject some solar power generation as reactive power (which helps maintain the voltage of the system), and the only limiting factor is the deployment of inverters with that functionality. As communication speeds get faster, it makes the collection of information from devices and the sending of settings to devices able to happen more frequently.

I see virtual power plants moving beyond today’s existing strategy for the aggregation of DERs, where utilities can focus on the range of power that’s achievable with a collection/aggregation of devices and how long they can maintain that power, without worrying about the devices at all. Ultimately the main difference between power plants and virtual power plants is that VPPs are energy-limited; batteries only store so much energy, while power plants effectively have enough fuel to last long enough that we don’t think about it.

If you can account for that energy storage, you can provide a range of operating conditions (power settings) and respective durations where a program manager never has to worry about “What do I set the thermostats at?” or “What should the battery discharge setting be?” We’re looking forward to our updated functionality that takes big steps toward being able to abstract away devices so that no one except for the device owners and Virtual Peaker needs to think about individual devices, and people at utilities can think about them as a collective resource.

Everything You Need To Know About Virtual Power Plants Conclusion

Analysts anticipate that the virtual power plant market size will exceed $6.47b by 2028, which is propelled both by continued innovation in the energy space and legislation designed to help and encourage the energy transition like the Inflation Reduction Act and the Bipartisan Infrastructure Law. That’s why Virtual Peaker is hard at work to make these technologies more reliable and efficient than ever.

Want to know more about what we have in store for virtual power plants? Stay tuned!

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About The Author
Virtual Peaker Team blog author

Virtual Peaker is a remote-first company based in Louisville, KY, with employees in many time zones. Since 2015, Virtual Peaker has worked to help our utility partners around the world build a better, greener grid through scalable, cloud-based software solutions. Founded by Bill Burke, Virtual Peaker has grown to serve utility DER and demand response management needs, as well as providing resources to help utilities meet decarbonization regulations and grid reliability.

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