Virtual Power Plant

A virtual power plant is a cluster of distributed generation installations (such as microCHP, wind-turbines, small hydro, back-up gensets etc.) which are collectively run by a central control entity.

The concerted operational mode delivers extra benefits such as the ability to deliver peak load electricity or load-aware power generation at short notice. Such a VPP can replace a conventional power plant while providing higher efficiency and more flexibility. Note that more flexibility allows the system to react better to fluctuations. However, a VPP is also a complex system requiring a complicated optimization, control, and secure communication methodology.

The energy crisis in America has opened up the door for innovative companies to enter an arena that has only been available for utilities/multinational billion dollar companies until now. With the deregulation of markets around the United States, the wholesale market pricing used to be the exclusive domain of large retail suppliers; however local and federal legislation along with large end-users are beginning to recognize the advantages of wholesale activities.

Energy markets are those commodities markets that deal specifically with the trade and supply of energy. In California there are two markets: Private Retail Electrical Market & Wholesale Electrical Market. California is the leader in green technology with governmental bodies pushing an agenda that the rest of the United States will eventually follow. Senate Bill 2X passed California Legislature March 30, 2011, mandates 33% renewable by 2020.

According to a recent report from Pike Research, the VPP market will continue its steady growth over the next several years, increasing from $5.2 billion in worldwide revenue in 2010 to nearly $7.4 billion by 2015, under a base case scenario. In a more aggressive forecast scenario, the clean tech market intelligence firm forecasts that global VPP revenues could reach as high as $12.7 billion during the same period.

"Virtual power plants represent an ‘Internet of Energy,’" says senior analyst Peter Asmus of Pike Research. "These systems tap existing grid networks to tailor electricity supply and demand services for a customer. VPPs maximize value for both the end user and the distribution utility using a sophisticated set of software-based systems. They are dynamic, deliver value in real time, and can react quickly to changing customer load conditions."

In the United States, Virtual Power Plants not only deal with the supply side, but also help manage demand and ensure reliability of grid functions through demand response (DR) and other load shifting approaches, in real time.

The concerted operational mode delivers extra benefits such as to the ability to deliver peak load electricity or load-following power at short notice.