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A virtual power plant is an association of decentralised units that are coordinated via a common control system. The units can be electricity producers such as biogas, wind power, photovoltaic, CHP or hydropower plants, flexible consumers, electricity storage and power-to-X plants. The purpose of a virtual power plant is to sell the electricity and flexibility provided by the large network of aggregated installations through a single source. The orchestration of this wide range of different installations allows synergy effects to be utilised and market entry hurdles to be overcome.

The beginnings of virtual power plants

A virtual power plant (VPP) generally means the aggregation of decentralised producers and consumers via a central control system that can control all the installations in real time. The idea of a virtual power plant can be traced back to the beginning of the liberalisation of the electricity market at the start of the 1990s. The concept of the virtual power plant was mainly treated as a theory before the turn of the millennium. Increasing computing capacity, faster communication paths and the market ramp-up of decentralised power plants using renewable energies paved the way for virtual power plants to be used commercially. In addition, the legislator created the legal framework necessary to allow virtual power plants to participate in the balancing energy and electricity markets. A large number of UK operators have emerged in recent years, and the resulting competition between the providers is producing innovations.

New markets, new opportunities

Established virtual power plants usually do not integrate every type and size of power plant. The decreasing costs of connecting power plants to the control system means it is becoming easier and easier to integrate small and micro-installations as well. Furthermore, hundreds of thousands of installations will no longer receive EEG subsidies in the coming years, meaning that the post-EEG installations can either be demolished or continue to be operated via direct sales through a virtual power plant. The increasing share of battery-powered electric cars creates incentives to coordinate their charging behaviour using a virtual power plant. A large number of studies have already shown that intelligent charging management can improve grid stability. Furthermore, the number of (home) battery storage systems is growing, which, integrated into a virtual power plant, are able to compensate for short-term fluctuations in supply or demand. Integration into a virtual power plant offers major advantages for the new players that have just been mentioned because the electricity and flexibility can be offered on the electricity market through the virtual power plant. The high market prices we are currently experiencing in particular mean that installation owners can generate higher profits than with a fixed feed-in tariff. As part of the VideKIS research project, we are developing this type of scalable and innovative virtual power plant with the aim of including micro-plants in the portfolio and using AI algorithms to ensure all the installations operate in an economically optimised way.

Are virtual power plants ‘THE’ solution for the energy transition?

Virtual power plants are currently cited as an optimal solution to the following challenges for renewable energies in the context of the energy transition:

Gain flexibility

Virtual power plants can react more flexibly by grouping several small installations together in order to respond more quickly to signals from the electricity market. Along with optimised grid utilisation, this also makes it possible to increase profits by running power plants at a higher capacity.

Reduce administrative costs

For installation operators, administrative costs are reduced by having the installation be part of a virtual power plant. Along with that, the virtual power plant operator can see to the technical requirements and upgrades to installations where this is necessary or if there are changes made to the legal framework. However, whether this option is available varies from contracting model to contracting model.

Optimise revenues

A virtual power plant can generate higher revenues for the installation than the aforementioned options for continued operation. If the post-EEG installation can be controlled, there are further opportunities to sell power in new markets such as the balancing energy markets. Smaller, individual installations can overcome the regulatory hurdles of the balancing power market by being combined in a virtual power plant. This means they can provide system services, which in turn means higher revenues.

By the way, you can find out more about our services in the energy sector on our website. Our experts bring the right mix of technology expertise and sound understanding of your digitalisation project.

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Picture Ellen Szczepaniak

Author Ellen Szczepaniak

Ellen Szczepaniak is a consultant at adesso in the Line of Business Utilities. Her work focuses on requirements engineering and project management (both classic and agile) in the energy and electromobility context. In addition, she is responsible for the innovative research project VideKIS as project manager. In addition to the project business, she continues to drive the topic of sustainability at adesso.

Picture Simon Bächle

Author Simon Bächle

Simon Bächle is writing his master's thesis in the VideKIS research project. He is investigating the economic operation of virtual power plants with the help of a mathematical optimization model. He is also working intensively on the application of data science in the energy industry.

Picture Zoe Holdt

Author Zoe Holdt

Zoe Holdt is a student assistant at adesso. She supports the development of different topics in the area of utilities and accompanies the research project VideKIS.

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