Navigant Research Blog

Defining the New Smart Grid: From Nanogrids to Virtual Power Plants

— July 7, 2014

Nanogrids and microgrids are building blocks that, like Legos, can be stacked into modular structures: in this case, distribution networks that tailor energy services to the precise needs of end-users.  This customization of energy services is clearly the wave of the future; but determining where to draw the line between these two business models can be challenging.

In many ways, nanogrids are just small microgrids that typically serve a single load or building.  They thereby represent a less complex way to manage on-site distributed energy resources (DER).  Ideally, microgrids would be able to serve entire communities, but utility regulations often stand in the way.  These same regulations make nanogrids larger business opportunity today than microgrids, despite their smaller size.

The series of storms and extreme weather that have attacked East Coast grids in recent years has sparked interest in community resiliency initiatives.  New York’s Reform the Energy Vision (REV) initiative is designed to explore how multi-stakeholder community microgrids might provide emergency power to end-users ranging from a private gas station to a municipal fire station (and perhaps a community center emergency shelter).  Connecticut has been struggling with this issue of how best to include both public and private sector end-users, bumping up against the long-standing prohibition of transferring power among non-utilities over public rights-of-way.  To date, only one of the 9 projects approved for funding under Connecticut’s DEEP program is actually up and running, at Wesleyan University.

The Virtual Option

The third smart grid business model that can help build resiliency into power grids is described in Navigant Research’s report, Virtual Power Plants.  A virtual power plant (VPP) is a platform that shares many attributes with the microgrid (and the nanogrid).  In North America, the most common resources integrated into VPPs are demand response systems.  Though VPPs cannot guard against power outages at the customer site, they can play a key role in lowering overall demand on the larger utility grid, thereby stretching scarce resources, directing them to mission critical loads.

The lexicon of organizing structures required to handle the increasing complexity of energy supply and demand is growing.  In order to make sense of this brave, new world in energy, Navigant Research has come up with the following chart highlighting key attributes of three different business models.

 Comparing Nanogrids, Microgrids, and VPPS

(Source: Navigant Research)

Regulators clearly need to revisit regulations standing in the way of community microgrids.  It appears that New York is pioneering this debate, allowing it to surpass California’s position as the leading microgrid market in the country in terms of sheer numbers of projects in the works.  Moving downstream again, it is also important to remember that nanogrids help create smart buildings that, in turn, can also be integrated into VPPs.  These combinations are vital to efforts to harness greater value from DER, thereby increasing energy security.

In the end, it’s not nanogrids, or microgrids, or VPPs, but the deployment of all three in flexible and dynamic configurations that is revolutionizing what was once the staid world of top-down, command-and-control monopoly utilities.


Data Centers Morphing Into Virtual Power Plants

— February 12, 2013

What is a “virtual power plant?” The term means different things to different people in different parts of the world.  Pike Research has come up with its own definition: A system that relies upon software to remotely and automatically dispatch and optimize generation, demand-side, or storage resources (including PEVs and bi-directional inverters) in a single, secure web-connected platform.

At their core, VPPs tap existing grid networks to tailor electricity supply and demand services for a customer, utility, or grid operator.  Without any large-scale fundamental infrastructure upgrades, VPPs can stretch supplies from existing generators and utility demand reduction programs.

The latest VPP model to emerge is based not on geographic proximity – typically the top consideration – but rather on enterprise ownership of global operations.  Ironically enough, the farther away each facility linked in the VPP, the better!  Companies such as PowerAssure are investigating ways for companies that use large global data center operations, such as Apple and Google, to create enterprise VPPs that span the globe, whereby data centers shut down operations and shift load from the regions of the world in daylight to the nighttime half of the globe, where power is cheaper.  The technology to carry out this level of global energy arbitrage – known as “following the moon” – is nearly here (though some engineers may disagree). “Data centers can modulate their IT loads based on external events, such as the price of power, and in the process, save money and get paid for providing demand response (DR) services,” Peter Maltbaek, vice president of worldwide sales for PowerAssure, told me.

Changing Models and Mindsets

The U.S. Environmental Protection Agency (EPA) recently revised rules governing limits imposed upon use of diesel generators that should help increase the availability of DR throughout the United States.  The chief challenge for global enterprise VPPs comes on similar regulatory restraints as well as the accounting end of such transactions.  Of course, if large numbers of large energy users employed this strategy, it could wreak havoc with local grid stability instead of enhancing reliability.  How national and regional regulators would respond to such a business model, based largely on financial flows instead of engineering smarts, is unclear.

Another challenge is changing the mindset of data center owners.  “They need 100% availability and are leery of anyone fooling around with their power supply, especially since it is only typically 3% of total costs,” added Maltbaek.

Lawrence Berkeley National Laboratories (LBNL) released a study last year that looked at data centers and their potential for DR.  ABB, which has invested in PowerAssure and has its own Decathlon DCIM VPP offering for data centers, has already installed a 1 megawatt (MW) DC microgrid at a data center in Zurich, Switzerland providing DR through use of its emergency generators; this system is currently being expanded to 10 MW, will later go to 30 MW, and will then be aggregated with three other data centers in the region.

In Germany, meanwhile, Siemens claims that recent regulatory reforms will allow it to boost its supply-side VPP capacity to 3,000 MW by 2018.  Last year, the company announced that it would increase the capacity of its VPP from less than 10 MW to 200 MW by 2015.  The company says that Germany has enough spare capacity on its transmission lines to create VPPs that span the entire country.


Virtual Power Plants Go Commercial

— April 18, 2012

A Microsoft/OSIsoft survey released in early 2012 ranked renewables integration (43%) as the second most important reason for implementing a smart grid, behind smart metering (71%).

A forthcoming report for Pike Research will show how microgrids are leading the world today in terms of revenues derived from smart grid renewables integration, but recent market activity has intensified in regards to the concept of a Virtual Power Plant, a smart grid optimization platform that still faces skepticism.

The company that first introduced the term to the world, Siemens, is taking the concept of a VPP to the next level in terms of actual market commercialization.

Given that Germany is phasing out nuclear power, the 23 megawatt (MW) “Regenerative Combined Power Plant” (RCPP) experiment carried enormous implications.  A total of 36 wind, solar, biogas, CHP, and hydropower generators were operated as if a single power plant was supplying 24/7 power to the equivalent of 12,000 households.  Project leader Dr. Kurt Rohrig of Kassel University was awarded the German Climate Protection Prize 2009 for his work on this cutting-edge renewable supply management experiment.  While it generated the equivalent of only 1/10,000 of Germany’s total supply, this successful R&D venture has convinced academics and a partnership featuring Enercon GmbH (whose wind turbine provides a unique suite of grid services), SolarWorld AG (a major manufacturer), and Schmack Biogas AG that the entire country of Germany could be completely powered with a diverse blend of complementary renewable energy resources.

Doubters have pointed out that the RCPP project failed to account for grid congestion challenges that might frustrate this sort of VPP under real market conditions.  That’s why Siemens’ recent announcement to work with German utility RWE Deutschland AG (RWE) to fully commercialize this VPP model is so important.

Siemens’ VPP commercial offering is based on 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.  A variety of combinations of supply- and demand-side resources can be optimized, whether the generator is a large wind farm or an on-site biogas unit.  DEMS was first deployed at a small Austrian paper and pulp mill in 2003.

Siemens was one of the first private companies to explore the concept of VPPs, playing a key role in providing the management system for another pioneering effort in Germany.  Since October 2008, this project has aggregated the capacity of nine different hydroelectric plants ranging in size from 150 kW up to 1.1 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 standalone systems.

Operated by RWE from a centralized control room based in Dortmund, the Siemens/RWE project will grow to 20 MW this year by adding combined heat & power (CHP) units and emergency back-up power systems to the existing hydro portfolio.  It will be expanded to 200 MW by 2015 by further integrating biomass, biogas and wind resources into the network, making this an official commercial offering in Germany, where recent market changes have created fertile ground for VPPs.

Since February of this year, power from this VPP has been sold at the Energy Exchange (EEX) in Leipzig, Germany under new amendment terms of the Renewable Energy Sources Act. This is the first direct marketing of renewable power under this new program. Given the proposed reductions in Feed-In Tariff (FIT) rates, the EEX is being viewed as a key new innovation to help optimize growing renewable energy resources in Germany.


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