Why Build a Power Plant if You Can Make a Virtual One? – Greentech Media News

The utilities of yesteryear had an obvious solution whenever they needed more power: simply build a new coal- or gas-fired plant. But with carbon emissions out of fashion and growing levels of demand response and distributed renewables on the grid, virtual power plants are stepping in to replace those central generators. 

In July, for example, the Taiwan Power Company hired Enel X, the advanced energy services business unit within Italian energy giant Enel, to shore up the Taiwanese grid with a virtual power plant (VPP) made up of assets provided by commercial and industrial clients.

The clients, which include cold storage, food processing, manufacturing and industrial facility operators, are part of an Enel X demand response program that offers payouts for modulating energy consumption in response to grid requirements. One company, Delta Electronics, said it could run its operations off battery power in order to ease the strain on the grid. 

Enel X CEO Francesco Venturini said in a statement: “Virtual power plants and energy storage systems will be key to Taiwan’s long-term transition to renewable power.”  

Worldwide, the market for VPPs is still minuscule compared to the number of thermal power plants in operation. Areas with growing electricity demand may require new power plants, even if some of it can be supplanted by distributed generation.

But research indicates that demand for VPPs could grow at more than six times the rate of thermal demand.

According to Global Industry Analysts, the thermal power industry is expected to see a compound annual growth rate of 3 percent in terms of production capacity between 2020 and 2027. Meanwhile, MarkNtel Advisors puts the VPP market’s CAGR at 20.2 percent up to 2025. 

Jeff Renaud, Enel X’s head of the Asia-Pacific and Oceania regions, told GTM in a written response that in Taiwan the company sees “an opportunity to continue building a significant VPP in the coming years as more competitive opportunities are introduced into Taiwan’s electricity system.”

In addition, “similar projects are being implemented in Japan, South Korea and Australia,” said Daniele Andreoli, head of demand response at Enel X. 

VPP benefits include scalability, flexibility, reliability and cost 

One attraction of the VPP concept is that it costs a fraction of what a traditional power plant does.

“The capital investment required for setting up VPPs varies with the primary use of assets that provide flexible capacity,” Andreoli explained. 

While adding solar panels, batteries, combined-heat-and-power units and other distributed generation assets can boost costs, “some demand response capacity can even have a capital investment requirement close to zero when the capacity is provided through load reduction,” Andreoli said.

Another benefit is that VPPs can be scaled up and down quickly to meet grid requirements, avoiding the big capital outlays needed for traditional thermal plants. That provides utilities and planners more flexibility in meeting uncertain demand growth, ensuring that the failure of one asset in the aggregation won’t bring down the entirety of its output.

“Overall, the cost of setting up VPPs, especially considering the changing market and grid dynamics due to the energy transition, is extremely low compared to traditional power plants,” said Andreoli. 

To be sure, thorny regulatory issues can stymie peer-to-peer energy trading or other methods used to aggregate distributed energy resources outside of utility constructs. But VPPs organized by utilities as replacements for power plants are not subject to the same kind of barriers in most jurisdictions. 

However, while setting up a VPP is simple and economically compelling, “the technology, commercial ability and energy market knowledge needed to develop them is massive,” Andreoli said. Coordinating hundreds of distributed generators or flexible loads to match the characteristics of a dispatchable power plant is a complex task, as is navigating the regulations on how participating customers and VPP operators are paid for the services they provide.

Enel X picked up most of that technology, capability and knowledge by acquiring tech-savvy grid edge players including Demand Energy and EnerNOC. 

Virtual power plants around the globe 

It is also worth noting that VPPs are also predominantly provided by companies that have developed complex software platforms to handle distributed energy and storage assets. 

German battery maker sonnen operates VPPs in Germany and California. Colorado-based software developer Enbala Power Networks runs VPPs in North America and Australia. Solar installer Sunrun is pitting a VPP against traditional power plants in New England.

What’s more, many of these firms are being snapped up by larger, more diversified energy companies in the same way that Enel acquired Demand Energy and EnerNOC. Sonnen is now owned by Shell, for instance, and Generac Power Systems bought Enbala this month.  

While it is perhaps too early to talk of direct competition between these companies and traditional power-plant providers, it is clear that thermal generation asset vendors are aware of the threat. 

Two years ago, Steven Martin, GE Power’s chief digital officer, told GTM the business was investigating blockchain-enabled VPPs because “the types of plants that are of interest in different parts of the world seem to be changing.”

Omid Mousavi, research and development director at the grid digitalization firm Depsys, said the trend toward VPPs is gathering pace as more and more grid-connected assets, from battery systems to home thermostats, are being equipped with smart technologies.  

“If you look at it globally, the quickest thing to install for a huge amount of power is a gas plant,” he said in an interview. “That is something that will continue. But in certain places, there will be [fewer] approvals [of thermal plants], to the point that we need to utilize more of these virtual resources.” 

Source: https://www.greentechmedia.com/articles/read/why-build-a-power-plant-if-you-can-make-a-virtual-one

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