Tech Insights

Real Power, Virtual Plants: VPPs Connect Diverse Energy Sources

March 12, 2024 by Jake Hertz

Virtual power plants have the potential to optimize the grid by integrating and managing energy from renewable sources, electric vehicles, batteries, and smart home devices.

As the global population grows and industrialization advances, the demand for energy surges, prompting increased reliance on conventional fossil fuel power plants. While these power plants have historically contributed substantially to the energy grid, concerns over environmental impacts, operation costs, and resource limitations have prompted a shift toward cleaner, cost-effective, and more flexible alternatives.

Virtual power plants (VPPs) offer an innovative approach to satisfy growing energy needs while prioritizing sustainability. This article explores the evolving energy landscape and its associated challenges while highlighting the pivotal role VPPs play in meeting future energy demands.


VPPs can be operated remotely.

VPPs can be operated remotely. Image used courtesy of Adobe Stock


The Current Global Energy Landscape

To address peak electricity demand in the modern era, the role of peaker power plants becomes crucial. Peaker power plants are electricity-generating facilities designed to operate during periods of high electricity demand. They typically use natural gas or oil as fuel and are characterized by their ability to rapidly increase or decrease their electricity output to meet fluctuating demand and maintain grid stability.

The transition toward renewable energy stems from the urgent need to combat climate change and reduce dependence on finite fossil fuels, contributing significantly to greenhouse gas emissions and environmental degradation. Solar, geothermal, tidal, wind, and other renewable sources offer sustainable alternatives that significantly reduce greenhouse gas emissions, curbing global warming and its associated adverse environmental impacts. 


Gas-fired peaker plant in New Jersey

Gas-fired peaker plant in New Jersey. Image used courtesy of Wikimedia Commons


However, the transition to renewable energy infrastructure presents formidable challenges. Conventional power plants, predominantly fueled by coal and gas, encounter difficulties in accommodating the intermittent nature of renewable energy generation. This mismatch between the variability of renewable energy sources and the rigid infrastructure of conventional power grids leads to inefficiencies and grid instability.

Addressing these challenges requires a shift towards a more adaptable and resilient energy infrastructure capable of effectively utilizing renewable energy variability while minimizing environmental impacts.


Virtual Power No Longer a Virtual Reality

In the current global energy landscape, VPPs are considered a potential solution to integrating renewable energy sources while ensuring grid stability

The "virtual" aspect of virtual power plants is the integration of wind, solar, hydro, or other renewables, often incorporating battery backup systems. This forms a decentralized (or virtual) power plant. Despite using diverse energy sources, VPPs can offer a cost-effectiveness of up to 60% compared to conventional plants. 

VPPs leverage distributed energy resources, such as smart electrical heaters, rooftop solar panels, and electric vehicle chargers, to balance energy supply and demand on a large scale. Notably, VPP operators do not own power plants. Instead, they optimize the usage of each connected asset, which is still owned by a third party (power consumers). This solution allows for the seamless coordination of diverse energy assets and real-time management of electricity consumption. 


Concept of virtual power plant.

Concept of virtual power plant. Image used courtesy of next 


Additionally, VPPs offer unique advantages over traditional power plants, such as their ability to shape consumers' energy use in response to grid conditions, thus enhancing grid flexibility and resilience. During energy shortfalls, VPPs mitigate blackout risks by harnessing diverse energy sources. If one source fails, like solar panels on cloudy days, utilities can switch to alternatives like wind farms and batteries. This makes VPPs a flexible alternative to power plants (both conventional and peaker power plants). 

The decentralized energy sources interface with the grid using communication technologies such as Wi-Fi, Bluetooth, and cellular services. This interconnection promotes active involvement in the energy system, diverging from the conventional passive consumer model. Empowering users to consume and contribute power, VPPs cultivate a deeper understanding of grid dynamics and foster a heightened commitment to transitioning towards cleaner energy solutions. 


The Future of Virtual Power Plants

It is uncertain how many customers will enroll in these emerging programs and how effectively their operators will manage supply and demand. However, improving artificial intelligence technology can boost consumers’ confidence in participating in VPPs. The Department of Energy's current objective is to increase national VPP capacity to 80 to 160 GW by 2030.

Despite challenges in consumer enrollment and regulatory standardization, advancements in technology and growing support from regulators pave the way for accelerated VPP deployment. With continued innovation and collaboration, VPPs hold promise for shaping a cleaner and more resilient energy landscape worldwide.