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The rise of virtual power plants

The further penetration of renewable energy generation challenges the conventional way of operating the electricity ecosystem. Business models have to be reinvented and grids redesigned

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Virtual power plants, Duncan Dale, Dr. Ulrich Focken, Energy & Metro systems

Global hydropower and European renewable energy giant Statkraft announced last month plans to build what it is calling the United Kingdom’s first virtual power plant to integrate wind, solar, battery storage, and gas which will have over 1GW of power.

The new virtual power plant will monitor the operations of over 1GW worth of wind power, solar power, battery storage, and flexible gas engines and will compare it with the constantly updating Day Ahead, On-the-Day, and cashout price forecasts. This will allow for real-time optimisation of power trading in the British energy market.

The increased flexibility provided by the virtual power plant will help facilitate the integration of intermittent power generation – such as that from wind and solar power – into the British electricity system, and subsequently help expand the UK’s renewable energy capacity.

“Our business model in the UK to producers of renewable power involves marketing renewable assets with maximum efficiency – for our partners, but also towards the power market,” says Duncan Dale, Vice President Sales & New Products of Statkraft in the UK.

“The idea is to match renewable power production with market demand within seconds. The increasing share of renewable energy in the UK will require a maximum of flexibility in the British power grid. By integrating batteries and engines into the virtual power plant and optimising their operations we can provide this flexibility reliably.”

German power predictions and virtual power plant company energy & meteo systems is providing the virtual power plant software for the Statkraft virtual power plant project, which will connect, coordinate, and monitor decentralised power-generating sites, storage facilities, and controllable loads, via a common intelligent control centre.

By interacting across all these feeds, the system can act within various energy markets just as a conventional power plant would, and by combining these functions with optimised power forecasting, decentralised and fluctuating power sources can be integrated into the energy grid.

“We are excited to expand our cooperation with Statkraft,” says Dr. Ulrich Focken, founder and Managing Director energy & meteo systems. “We are already successful partners in Germany and believe that this new project is an important step in enabling Statkraft UK to make the most of renewable energy.”

Statkraft is already involved in Europe’s largest virtual power plant, interconnecting more than 1,400 wind and solar installations with an installed capacity of approximately 12GW.

According to Statkraft, control signals, forecasts, and information about actual generation are exchanged between individual installations and the virtual power plant within seconds, meaning that generation can be shut down or restarted within seconds as necessary.

The virtual power plant consists of onshore and offshore wind power, solar energy, bioenergy, hydropower, and are generated by producers all across Germany.

“The virtual power plant connects these small power producers,” explains Andreas Bader, Vice President Sales & New Products. “This enables us to sell the renewable power and draw on the full flexibility of the renewable plants as if it were one large-scale reliable supplier. Moreover, the power producers do not have to sell the power themselves, with all the risks associated with fluctuations between supply and demand.”

“Because renewables are heavily dependent on weather, you need to know what the weather is doing. As we all know from everyday life, the weather forecasts are often wrong. Even five minutes before you sell the production from your wind park, you are not sure exactly how much you are going to produce.”

“You need to forecast and sell your production as efficiently as possible. The short-term market is highly volatile.”

In a Virtual Power Plant, decentralised units in a power network are linked and operated by a single, centralized control system. Those units can be either power producers (e.g. wind, biogas, solar, CHP, or hydro power plants), power storage units, power consumers or power-to-X plants (such as power-to-heat and power-to-gas).

When integrated into a Virtual Power Plant, the power and flexibility of the aggregated assets can be traded collectively. Thus, even small units get access to the lucrative markets (like the market for balancing reserve) that they would not be able to enter individually. Any decentralized unit that consumes, stores, or produces electricity can become a part of a Virtual Power Plant.

Additionally to operating every individual asset in the Virtual Power Plant, the central control system uses a special algorithm to adjust to balancing reserve commands from transmission system operators and to grid conditions – just as a larger, conventional power plant does.

The Virtual Power Plant can react quickly and efficiently when it comes to trading electricity, thus adjusting plant operations according to price signals from the power exchanges.

A virtual power plant is a pool of several small- and medium scale installations, either consuming or producing electricity. Individual small plants can in general not offer services as balancing reserve or offer their flexibility on the power exchanges as their production or consumption profile varies strongly, they have insufficient availability due to unforeseen outages or do not meet the minimum bid size of the markets.

In addition, there are strict requirements regarding the availability and reliability of the flexibility offered in the market. To overcome these barriers, the solution is simple: work together! The combination of several types of flexible production and consumption units, controlled by a central intelligent system, is the core idea behind a Virtual Power Plant. This way, a VPP can deliver the same service and trade on the same markets as large central power plants or industrial consumers.

Virtual Power Plants can reach a total capacity equal to one or several nuclear power plants, though due to the volatility of renewable energy sources it changes constantly. If the wind isn’t blowing or the sun isn’t shining, solar and wind assets contribute less to the Virtual Power Plant.

The flexibility, meaning the quick and versatile ability to balance the grid, is among the greatest strengths of Virtual Power Plants and their most notable difference compared to conventional power plants.

VPPs can utilise the aggregated power to react to changes of the electricity price on the exchanges, quickly adapting to the existing supply of power in the grid, and thus execute trades. After all, the price of electricity changes constantly, up to 96 times per day in intra-day trading on power exchanges. A price difference of two or even three digits per megawatt hour is no surprise here.

A Virtual Power Plant, per contra, would simply reduce the output of connected hydro and biogas plants to react to a surplus of wind power. And if there is too little power on the grid, the control system can increase hydro power or biogas plant power production.

Thus, the VPP promptly balances fluctuation in power production in real time without straining the public grid. To submit the commands that lower or raise feed-in amounts, the control system uses an API or remote-control units installed on each asset.

Industrial and commercial power consumers can profit from price signals coming from the power exchanges thanks to the data collected in the Virtual Power Plant. They can limit their power consumption to times when electricity is readily-available on the market and therefore cheap – in total, companies can thus reduce their power costs by up to a third.

This consumption optimization can be fully automated by the Virtual Power Plant, if desired. The VPP’s control system then sends commands to the company’s machine control room, complying with the individual restrictions, of course, and only intervening as much as needed. A power meter with consumption metering is required for this, though, and they are only available to consumers with an expected power consumption that exceeds 100,000 kWh annually.  

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