With the decline of feed-in tariffs and net metering, distributed renewables providers need to explore new ways to provide value through these installations. While the costs of solar and wind installations have fallen sharply in the last decade and can be significantly cheaper than sourcing electricity from the grid, their variability is a weak point. This means that although they produce cheap electricity, this may or may not be available when the customer needs it.
Energy storage systems can help with this issue, but they are still relatively expensive. An alternative solution is to provide a software-based platform that matches supply and demand in real-time. Although this optimization could be done at a local level using the available loads and generating assets, that is often not possible. This is where the aggregation of distributed renewables assets into mixed-asset virtual power plants (VPPs) comes into play. Self-consumption still offers the most value given current system cost and electricity rates; however, it should be viewed as the starting point for any plan to develop distributed renewables projects.
This Navigant Research report explores the potential revenue streams and other sources of value available to distributed renewables generation assets in front of the meter using VPPs (not considering those available through load management). It also explores the aggregation services and the solutions that are being developed around them. Navigant Research focuses on deregulated markets (also known as consumer choice markets) in this report due to their transparency, but the analysis and recommendations are valuable to players working in regulated markets as well. The report also examines the key challenges related to the implementation of renewables aggregation strategies and provides case studies of VPP-enabled renewables business models.
Key Questions Addressed:
- How does the aggregation of distributed renewables assets into virtual power plants (VPPs) optimize the supply and demand of electricity?
- How do aggregation platforms help transform formerly passive consumers into active prosumers?
- What are the three main sources of revenue for distributed renewables generation in deregulated markets?
- What are the three main integrated solutions that can increase the value of distributed renewables?
- What issues do distributed renewables operators that want to participate in ancillary services markets face?
- How can distributed renewables providers unlock value for customers via VPP business models?
- What hurdles are slowing the adoption of renewables aggregation?
- How can companies active in the distributed renewables value chain position themselves to benefit from its expansion?
Who needs this report?
- Distributed renewables providers
- Virtual power plant (VPP) providers
- Distribution network operators
- Grid operators
- Energy suppliers
- Installers and developers
- Equipment manufacturers and inverter companies
- Investor community
Table of Contents
1. Executive Summary
2. Renewables Revenue Streams in Deregulated Energy Markets
2.1 Revenue Streams
2.1.1 Wholesale Electricity Market
2.1.2 Ancillary Services (Reserve and Balancing Markets)
3. Aggregation as a Way to Unlock Value
3.1 Emerging VPP-Enabled Renewables Business Models
3.1.2 Extended Self-Consumption
3.1.3 Energy Community Orchestrator
4. Challenges for the Implementation of Renewables Aggregation Strategies
4.1 Regulatory Barriers
4.2 Costly Communication Infrastructure
4.3 Need for Standardization
4.4 Lack of Forecast Quality and Data Access
4.5 Current Limited Scale
5. Conclusions and Recommendations
List of Tables and Figures
- Value Capture Hierarchy for Distributed Renewables Assets with 2017 System Costs and Electricity Rates
- Classic Structure of a Deregulated Electricity Market
- Clearing Order in a Deregulated Electricity Market
- The Enernet: VPPs, Nanogrids, and Microgrids
- E.ON SolarCloud
- Screenshot of GreenCom’s Energy Community User Interface in Operation
- Lexicon of DER Business Models