Virtual Power Plants: Addressing Platform Integration, Customer Education & Business Models

Distributed energy resources (DERs) have proliferated due to technological advancements, reducing costs and the increasing pressure to reduce overall carbon emissions. While electrical grids around the world become more decentralized, new challenges emerge as the increased penetration of renewables threatens reliability and stability of supply. One way of combating this issue is by aggregating independent DERs to form a cloud-based distributed power plant, also known as a Virtual Power Plant (VPP). As VPPs become increasingly important to the global energy transition, we asked three of our speakers from our upcoming 13th Energy Storage World Forum Virtual Conference to give us their opinions on this burgeoning innovation. Some key issues raised included the lack of standardized protocols, customer engagement and potential business models.

VPPs provide several benefits to both customers and utilities. They primarily allow DERs to tap into new markets like wholesale energy and ancillary markets. According to Romele Constantino (Endeavour Energy), who will be discussing the effectiveness of residential batteries in reducing peak demand under various operating and environmental conditions, by enabling additional value to be derived from DERs, customers will be able to maximize their return on investment (ROI). For utilities, VPPs offer network support for additional capacity to address network constraints. Eddie Thanavelil (Evoenergy) who will be sharing how to maintain distribution network stability while introducing more DER into the grid, added that VPPs can also provide customer behavior and load forecasting data. This additional visibility of behind-the-meter assets can be leveraged for internal planning assessments and local analysis, which in turn further optimizes the grid. 

Justin Harding (AusNet Services) observed the circular nature of benefits that VPPs provide, “If VPPs enable the financial proposition for customers to be improved because they’re accessing other value streams, then that should help drive the uptake of increased levels of battery storage and other DER devices, which, again, provides us as a network with a broader pool of DER that we can access to improve the management of the network” he said. Catch Mr. Harding elaborating on how to enable “plug-and-play” capabilities for DER to integrate with new energy markets at the upcoming virtual conference, 25 – 27 November 2020.

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Every new innovation, however, comes with it’s own set of challenges. One aspect highlighted was the integration challenge brought upon by the lack of standardization of control and communication protocols to enable VPPs. This lack of uniformed protocols makes it difficult for utilities to control DERs from different manufacturers, with different capabilities on a single platform. Currently, there are several trials being conducted around the country to address this particular challenge, including a project to establish and test a marketplace for DER involving AusNet Services and its commercial arm Mondo. Catch Justin Harding’s presentation at the virtual conference this November where he will elaborate on how to enable open “plug-and-play” capabilities for DER to integrate with new markets.

The second issue raised was the importance of customer engagement. “If you have more customers participating in a VPP, that virtual power plant will have a bigger capacity which can provide more benefit in addressing network constraints”, Mr. Constantino explained. 

Although there are several trials being conducted, because VPPs are so innovative and niche, only early adopters are currently being targeted. In order to scale up to the mass market, a lot more needs to be done in terms of educating end-users. Unlike utilities, it’s usually the retailer or installers that have the closest contact with customers and are best placed to help them understand this new world of DER. Thus arises the need for common messaging across the value chain so that all these different players are able to effectively communicate the true value of DERs to everyday customers.

So, what would be the ideal business model for Virtual Power Plants? According to Mr. Thanavelil, enabling individual DERs to tap into different service markets while maintaining power quality for the residential customer would be the goal to reach. Value stacking will be crucial for this ideal scenario to be realized, but first, regulations will need to catch up with the innovation. Mr. Harding pointed out that there is still a lot of experimentation to be done at this stage. As trials begin showing more positive results, it could potentially bring about regulation changes that will eventually lead to the perfect balance of available technology, customer value and business case being struck.

Still in its early stages of development, VPPs show great potential in impacting the future of electricity generation. With the constant development of new buildings and residential estates, the existing grid capacity becomes increasingly constrained. By enabling significant generation to be harnessed from households and businesses, VPPs may allow utilities to defer investment in new infrastructure, while still meeting increased demand. VPP technology also facilitates smart management of individual DER thus further balancing the grid while maximizing the value that these assets provide to customers.

Listen to what Australian utilities have to say about DER, Virtual Power Plants and other energy storage related topics at the 13th Energy Storage World Forum Virtual Conference,  25 – 27 November 2020.

If you want to know more about this and other topics directly from end users of energy storage technologies join us at one of these annual events: The Energy Storage World Forum (Grid Scale Applications), or The Residential Energy Storage Forum, or one of our Training Courses.


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