Virtual power plants (VPPs) rely upon software systems to remotely and automatically dispatch and optimize generation or demand-side or storage resources in a single, secure web-connected system. In the U.S., VPPs 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.
In short, VPPs represent an “Internet of Energy,” tapping existing grid networks to tailor electricity supply and demand services for a customer, maximizing value for both end-user and distribution utility through software innovations.
Without any large-scale fundamental infrastructure upgrades, VPPs can stretch supplies from existing generators and utility demand reduction programs, delivering greater value to the customer (lower costs, new revenue streams) while also creating benefits to the host distribution utility (avoidance of capital investments in grid infrastructure or low-capacity peak power plants) as well as the transmission grid operator (regulation services such as spinning reserves). When compared to the fossil central station power plants that dominate electricity markets worldwide, one of the primary advantages of VPPs is they can react quickly to changing customer load conditions, are dynamic and deliver value in real time.
Three heavyweight companies to watch out for in the VPP space are Siemens, Schneider Electric, and Cisco.
Siemens was one of the first firms to explore the concept of VPPs, playing a key role in providing the management system for one of Germany’s pioneering efforts. A VPP project that has been operating since October 2008 aggregates the capacity of nine different hydroelectric plants ranging in size from 150 kilowatts (kW) up to 1.1 megawatts (MW), with a total VPP capacity of 8.6 MW. The VPP framework opened up new power marketing channels for these facilities that would not have been viable if these distributed energy resources (DER) were still operating as stand-alone systems.
The key technology Siemens is offering to the VPP market is its Decentralized Energy Management System (DEMS), which is designed to enhance both wholesale and distributed generation operations according to pre-defined economic, environmental or energy-related priorities. The company is now engaged in a variety of smart grid projects in the U.S. that could be considered VPPs (or at least stepping stones to future VPPs) in Kansas, Texas and Hawaii.
The Schneider Electric version of a VPP is focused on capturing and aggregating DR resources from large commercial clients. With new managers quite familiar with the evolution of DR markets, they appear to have a very focused and unique strategy, targeting various advanced wholesale/retail markets, such as the PJM control area. With an emphasis on dashboard presentations, they seem to have a well-tuned business entry strategy.
In 2010, the company has launched a new venture whose prime goal is to serve as a broker between utilities and large customers – especially those that own large amounts of commercial buildings. Worth over $27 billion, this French company has a market presence in over 100 countries, with its largest portion of business (44 percent) in Europe, followed by North America (27 percent) and Asia-Pacific (19 percent).
Last, but not least, is Cisco. Top managers for its VPP business segment come from Southern California Edison (SCE), a utility whose large-scale efforts in DR – representing over 1,000 MW of DR capacity – and development of up to 500 MW of utility-owned distributed solar PV distributed throughout its service territory in 1 to 2 MW distinct systems – represent the perfect utility partner to launch such a new business enterprise. With its “Building Mediator,” Cisco is also targeting this network device on energy-intensive corporate buildings, a venture with downside risk.
Cisco sees its function as playing a role in the coordinating aspect of bringing DR and distributed renewables together, and is therefore involved with a pilot project involving SCE, the U.S. Department of Energy (DOE), and the City of Irvine in southern California. In Cisco’s view of the world, the VPP is a much better platform to aggregate and boost value from the full capability of grid networks than the microgrid.
At present, the focus of Cisco’s VPP business strategy is DR, but in the long-run, Cisco sees its role as “developing a communications fabric that connects prices to devices, and helps create a level playing field for all of the key elements of a distributed energy network – DR, distributed generation and storage.”
Article by Peter Asmus, appearing courtesy Matter Network.
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