At present, there is no firm definition of a Virtual Power Plant (VPP).
In European countries such as Denmark, a VPP can refer to the ability of commercial consumers to purchase capacity at the wholesale level via an auction from small-scale base load fossil and biomass facilities for short periods of time.
In the U.S., a VPP typically refers to the ability to aggregate power production from a cluster of grid-connected distributed generation (DG) sources via smart grid technology by a centralized controller, typically a utility, and then harmonize this generation with load profiles of individual customers.
What both of these perspectives share is this: VPPs rely upon software systems to remotely dispatch generation resources. In the U.S., VPPs not only deal with the supply side, but also help manage demand through demand response 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.
Are VPPs a part of the smart grid? With its emphasis on smart meters, real-time pricing and demand response, the smart grid is a necessary prerequisite for VPPs. But VPPs are in essence, attempts to create a mini-independent system operator on the customer side of the meter. VPPs are a natural evolution of the smart grid and are highly synergistic with the various components that are hallmarks of the smart grid.
Is a VPP synonymous with “microgrid?”
In the Pike Research report entitled Microgrids: Islanded Power Grids and Distributed Generation for Community, Commercial and Institutional Applications, the following definition was provided for a microgrid:
An integrated energy system consisting of distributed energy resources and multiple electrical loads operating as a single, autonomous grid either in parallel to or “islanded” from the existing utility power grid.
While projects such as Duke Power’s MacAlpine project in south Charlotte, North Carolina – in which 100 households participated in a VPP pilot project powered largely by a 50 kW solar photovoltaic array — can be considered both a microgrid and a VPP, in Pike Research’s view, there are some key distinguishing features behind both of these emerging concepts, and MacApline is the exception rather than the rule.
VPPs and microgrids share some critical features – such as the ability to aggregate DG (and storage) at the distribution level — but are distinct in the following ways:
- Microgrids can be grid-tied or off-grid (VPPs are always grid-tied)
- Microgrids can “island” themselves from the larger utility grid (VPP’s do not offer this contingency)
- Microgrids typically require some level of storage (whereas VPPs may or may not feature storage)
- Microgrids are dependent upon hardware innovations such as inverters (whereas VPPs are software dependent)
- Microgrids typically only tap resources at the retail distribution level (whereas VPPs can also create a bridge to wholesale markets)
- Microgrids still face regulatory hurdles (whereas VPPs can, more often than not, be implemented under current regulatory structures and tariffs)
The highest profile VPP in Europe to date is called “FENIX,” which is a rather odd abbreviation for “Flexible Electricity Network to Integrate the eXpected ‘energy revolution.’” With heavyweight companies such as EDF Energy Networks, Iberdrola SA, Gamesa and Siemens all involved, FENIX was more focused on integrating wholesale power supplies from wind farms and industrial co-generation (as well as distributed Combined Heat & Power plants) than on harmonizing distributed renewables such as solar PV or fuel cells with the load profiles of individual retail customers.
Two projects in Colorado can also be classified as VPPs: the FortZED project in Fort Collins and Xcel Energy’s SmartGridCity pilot in Boulder, the latter being the better example since the goal of the project is to allow a central control dispatcher to treat a portfolio of distributed generation resources as if they were a single large power plant, maximizing efficiency through load shifting and demand response.