Discover the Promise of Virtual Power Plants
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VPPs have tremendous potential to support the grid during the energy transition while offering significant economic benefits to organizations that participate in them. The need for VPPs is growing, creating opportunities that demonstrate the value of VPPs to the grid and organizations with flexible or controllable loads and assets. Find out how your organization can benefit.
By Steffi Klawiter
Steffi is a Senior Product Manager at Enel. She is responsible for understanding the VPP market and how Enel’s software services can be enhanced to serve organizations of all sizes and technologies, allowing them to earn revenue by assisting the grid to balance electricity supply and demand in real-time.
A virtual power plant (VPP) is a decentralized portfolio of distributed energy resources (DERs) and other assets that can be aggregated and operated as a larger scale asset in response to external factors – such as requests from grid operators or price signals like time-of-use rates. Adoption of DERs is growing, as they enable organizations to be more flexible in how they consume energy, advance their sustainability goals, and boost resilience across their operations. A wide variety of DERs and assets can be aggregated into a VPP, including:
VPPs can leverage and aggregate DERs to address grid challenges. For example, VPPs can be helpful in addressing energy supply shortages during times of peak demand by using flexible capacity to help reduce demand during system peak hours. They can also improve real-time balancing of supply and demand on the grid by providing energy flexibility and ancillary services – energy can be focused on essential loads and shifted away from non-essential tasks, enabling more resilient communities.
There’s also another factor to consider. As peaker plants age and extreme weather events increase in intensity and duration, VPPs may be a more reliable resource than fuel-constrained systems for grid support. In last year’s Winter Storm Elliott, for instance, there were widespread capacity shortages in the PJM Interconnection, a regional transmission organization that serves all or parts of 13 different states in the Mid-Atlantic United States. PJM found that gas-fired power plants accounted for 63% of the unplanned outages, and coal-fired generators made up 28% of the outages on a MWh basis. PJM noted that “a lack of fuel supply was the largest single cause of the outages at the gas-fired power plants, followed by freezing equipment.” In contrast, VPPs helped to avert what could have been an even larger disaster, with aggregated demand response performing well during the extreme weather.
At the most basic economic level, organizations that participate in VPPs can decrease energy spend and earn new revenues by participating in grid programs.
Organizations that don’t have any storage or generation assets may still be paid because they are offering flexibility to the grid by temporarily reducing their energy use or shifting it away from times of peak demand, and they will be doing this at times when it is most valuable. As a result, they receive new revenue from utilities or grid operators based on their level of energy reduction. They are compensated for contributing much needed energy flexibility to an energy grid that is increasingly pushed to its limit.
But the value of VPPs goes further than just these direct economic benefits. VPPs are a growing contributor to local energy stability as the energy transition progresses. Participants are helping to keep energy reliable in their communities.
It’s important to note that today, participating in a VPP with DERs requires a site to be integrated with the grid to monetize their assets. However, the growing integration of DERs can create challenges for both organizations and grid operators. For an aging grid that was not initially designed with DERs in mind, rapidly integrating DERs can disrupt electrical frequencies and create voltage issues. As a result, VPP participation is only possible in certain states and regions based on local regulations. Organizations need an energy partner with energy market expertise across the country, like Enel, to help them navigate this landscape and unlock all available value streams.