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Virtual Power Plants: Some Assembly Required

Jan. 21, 2022
There has been a major shift in the power grid’s opinion of aggregated BTM-DERs.

It’s getting harder to remember that distribution energy resources (DERs) started out on a very small scale when marketing research groups are predicting these devices will grow to somewhere around 400 gigawatts (GWs) by 2025. That’s a great deal of electricity generation, especially when you consider it is a behind-the-meter (BTM) power source. As staggering as that figure is, there are those projecting the global virtual power plant (VPP) market will reach about US$1.5 billion or more by 2026.

All of these estimates and projections are based on some solid digital technological advancements being applied to the smart grid. Where once VPPs were merely interesting niche experiments, many experts are now saying that VPPs have the potential to becoming a grid changer. The power grid is modernizing, and one area identified is decentralizing the power generation infrastructure and VPPs are seen as a critical step in this process.

Interestingly, it was two years ago this month that “Charging Ahead” first reported on VPPs. At that time, VPPs were one of those applications that appeared to be getting some attention, but not enough consideration to be more than a niche market. There were too many significant concerns needing attention to have many jumping on the bandwagon. Still many authorities thought VPPs were a trending technology with the potential of changing the grid, which is correct today. So, it’s time to revisit the topic and see what is driving it.

A Different Concept

During those past two years, there has been a lot happening with BTM-DER technology. So much so that VPPs are more commonplace worldwide than ever before. There has also been a major shift by the power delivery industry in how VPPs are perceived. This shift started with the customers and has slowly moved to the utilities, regulators, and independent power providers. Several experts credit dropping prices for solar panels and the availability of energy storage batteries, but that is only part of the story.

VPPs are more than hardware, and there are other influences at work, which are coming together at the right time. The logical starting point is the Internet of Things (IoT). Initially IoT was more oriented toward toasters and thermostats than DER devices. But as IoT technology matured it starting branching off into specialized grouping. In the power delivery industry we focused more on IIoT (Industrial Internet of Things), UIoT (Utility Internet of Things), and IoTSP (Internet of Things Services and People).

These specialized categories take advantage of smart devices connected to and controlled by various forms of cloud-based computing. This development set the stage for what has been called the IT/OT convergence. This advancement allows IT (information technology) and OT (operational technology) systems to combine into a single platform. Rather than repeating the information here, see the September 2021 “Charging Ahead” for IT/OT details. Technologically this was a pivotal point in the advancement of VPPs, but there are also other forces at work too.

It Starts Getting Interesting

One of the most surprising VPP influencers has been the impact of global climate change. Because of ever-changing weather patterns, extreme weather-related events (i.e., wildfires, ice storms, back-to-back category 5 hurricanes, etc.) have led to prolonged power outages. Frustrated customers found their own solutions to extended outages. They added energy storage to their DER systems. In effect turning them into BTM nanogrids and microgrids with sophisticated hardware and software supplied by companies like Eaton, GE, Hitachi Energy, Schneider Electric, and Siemens Energy to name a few.

The timing was spot on with actions being taken by regulatory bodies and legislatures in the form of support for the BTM-DERs. In the U.S., there were several important rules issued by FERC (Federal Energy Regulatory Commission) that addressed DERs and the grid, but Order No. 2222 was critical. In FERC’s words, “This rule enables DERs to participate alongside traditional resources in the regional organized wholesale markets through aggregations, opening U.S. organized wholesale markets to new sources of energy and grid services.”  In simpler terms, the order opened the wholesale power market to BTM-DER technology.

The support had the desired affect with both utilities and aggregators announced grid-scale VPP projects taking advantage of the support and the technologies. This is where another technological advancement comes to play. How can thousands of BTM-DERs be controlled to perform like a multi-megawatt central generating plant? At the heart of the control system is the ability to gather data, analyze it, and act on it.

Digitalization of Energy

Talking with Tilo Buehler, global product manager, Grid Edge Solutions, Hitachi Energy and Nicolas Heine, Digital & Service Manager, Hitachi Energy answered a lot of questions about the intricacies of controlling VPPs. Buehler opened the discussion saying, “Technology is key to making a VPP work. Having a solid software foundation is the best way to ensure success of deployment, like the e-mesh portfolio, that covers the on premise, as well as the aggregated control algorithms. DERs are foundational to VPPs, but communication infrastructure is the most important technology to orchestrate them.”

Buehler continued, “This software needs to aggregate and collate different devices, take signals from system operators, and connect ISOs into distributed resources. The control layer is important for “number crunching” and assigning a suitable amount of contribution for all DERs to achieve an effective MW output. Without a communication and control layer and DERs, VPPs won’t work.”

Heine added, “Artificial intelligence/machine learning (AI/ML) and data analytics play a greater role in 'auto bidding,' a way of forecasting how to make the most of capacity and prices in the energy market. The better the forecast, the better the decisions made. AI/ML and analytics can forecast what to bid for greater return to DER customers and VPP vendors. These technologies can also be used to forecast peak times for generating renewable energy and calculating output needed based on that.”

Both agreed, “The move to digitalization in the energy industry is huge. Communications and software are elements the traditional grid hasn't put at the forefront, and instead designed a more passive grid. In traditional set ups, network operators would build additional capacity and network, and if anything went wrong, there’s still enough capacity to keep the lights on. VPPs respond proactively to an abnormal situation but need connectivity and software to make this approach work. In this case, the skills of power workers need to evolve to manage this.”

They finished the discussion saying, “It’s possible to upskill the current workforce to support these new digitized efforts, but it’s also important to invest in the best talent focused on these emerging areas. For example, the forecasting piece of VPPs could be the difference between one company and its competitors returning more value, and that could affect winning contracts. More data, sophisticated algorithms and people who know how to manage both will lead to a more successful business overall.”

Tangible Results

Utilities have been working with aggregators and independent power producers create VPP programs. This is especially true in California. If a customer owns Tesla’s Powerwall in California, there are plans enabling them to join Tesla VPP programs in Pacific Gas & Electric, Southern California Edison, or San Diego Gas & Electric’s territories. Swell Energy is also working with these three utilities on VPP projects. In addition Swell is also working on VPP projects in New York and Hawaii.

Next Kraftwerke, a wholly owned subsidiary of Shell, operates one of the largest VPPs in Europe. According to their website they manage 12,343 aggregated units with a network capacity over 9.8 gigawatts (GW). VPP activity is taking place Asia too. Singapore selected Hitachi Energy to supply its e-mesh PowerStore battery energy storage technology with its intelligent digital control system for Singapore’s first VPP. That VPP project’s goal is validating methods for integrating more renewable energy onto the city-state’s electricity networks.

These are only a few examples of the VPP activity taking place worldwide, but they show the BTM portion of the grid is changing. VPPs are a relatively new technology, and they are already improving grid resiliency when grid stressing incidents occur. It’s hard to imagine what the grid will look like in the next ten years. Initially experts predicted networks of BTM-DERs would force bidirectional power flows coming from the distribution network, and that has happened, but it hasn’t stopped there.

The next step is focused on decentralizing the power delivery system to put the power where is it consumed, making grids more resilient to failures. Regulatory support has set the stage for that step and utilities are working with aggregators to make it happen. VPPs are already providing the ancillary services associated with large, centralized power plants helping to maintain grid stability with frequency regulation, voltage control, load following, and loss compensation to name a few. The perception of VPPs is changing for the better and VPPs are consequently improving the grid!

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