Accelerating energy transition by forming virtual power plants on blockchain

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Contributed by Dr. Mohsen Khorasany, TYMLEZ

Influenced by the increasing penetration of “behind-the-meter” distributed energy resources (DER), power systems are experiencing a paradigm shift from a centralized structure to a decentralized one. The high penetration level of DER raises technical, commercial, and regulatory challenges since the grid infrastructure is designed to deliver large-scale centralized generation to consumers rather than to integrate millions of consumer-owned generators. However, efficient DER integration programs unlock these resources’ potential values, which accelerates the transition to a carbon-free energy system. Recent trends in DER have provided the opportunity to form virtual power plants (VPPs) to aggregate and coordinate behind the meter resources across the network to exploit their flexibility. Indeed, technological advances such as Blockchain technology are key enablers to form VPPs and facilitate the orchestration of a diverse set of DER assets.

Increase in DER integration

The current trend in Australia’s energy sector is a rapid increase in the integration of renewable energy and distributed energy resources (DER) as a path to decarbonization and decentralization of energy. Australia has the highest uptake of solar globally, with more than 2.68 million rooftop solar power systems installed in total, as of 31 December 2020. About one in four households in Australia has solar panels, and this proportion rises to four in 10 in some parts of the country. At the same time, Australian households’ enthusiasm for deploying batteries resulted in the installation of 23,796 batteries with a combined capacity of 238 MWh during 2020. It brings the nation’s cumulative tally of installed battery energy storage systems- including those installed in homes, on commercial premises, and on the grid- to almost 110,000. The number of installed DER is expected to provide up to 45 percent of Australia’s electricity generation capacity by 2050.

Importance of coordinating DER

While the growth in the customer adoption of DER provides them with the opportunity to reduce their electricity bills and cut carbon emissions, it raises operational and market challenges for the grid, since the grid infrastructure is designed to deliver large-scale centralized generation to consumers rather than to integrate millions of consumer-owned generators. Indeed, the lack of visibility over these behind-the-meter devices forces grid operators to use conservative methods to assess the impact of DER on the network they operate. On the other hand, integrating behind-the-meter demand flexibility resources into the grid accelerates the transition to a carbon-free energy grid. Through efficient DER integration programs, grid operators can rely on the flexibility of DER to manage their grids, while DER owners have the opportunity to maximize the return on their investment through participating in new markets. Hence, innovative and scalable solutions are required to effectively deploy behind the meter flexible resources into the grid.

Can VPPs be a game-changer?

With increased DER deployments, Virtual Power Plants (VPPs) are becoming more commonplace than before. While traditionally VPPs were focused on the large-scale front-of-the-meter assets, recent trends in DER deployments have provided the opportunity to form VPPs based on the aggregation of small-scale behind-the-meter assets. For an asset to be part of a VPP, it does not matter whether it is supply, load, or storage. What makes the asset eligible for a VPP is that it can be sensed, touched, and controlled. Hence, the VPP can be formed by aggregating thousands of behind-the-meter devices with the capability to react to control and market signals. VPPs can reliably control and orchestrate a portfolio of DER to deliver value from behind-the-meter assets upstream to wholesale markets. Through a flexible VPP -a VPP formed by aggregation of flexible resources-, the available resource potential behind customers meters can be identified to be deployed for providing services.

Role of Technology

Implementations of flexible VPPs depend upon DER availability, market structures, regulatory policy, and key enabling technologies such as Internet of Things (IoT), Machine learning (ML), and Blockchain technology. Indeed, the orchestration of a diverse set of DER assets owned by multiple owners, each with their own priorities and operational characteristics, is a sophisticated and challenging task. Proper DER asset monitoring devices are required to collect data from these devices. Additionally, software is the glue that binds all the different pieces of technology enabling a VPP together into a coherent, user-friendly solution. Hence, a combination of hardware and software is required to deliver wide-ranging energy services from VPPs.

The IoT devices in the energy sector, which include smart meters and monitoring devices, collect information about the customers’ energy consumption/generation patterns. The data then will be used to perform individual meter level analytics from the edge of the grid, enabling the procurement of demand flexibility resources to create more cost-effective programs. Wide range of devices in the VPP generate a considerable volume of data that can be used for more accurate forecasting through ML algorithms

The other enabler for VPP is blockchain which has received tremendous attention as a communication framework in recent years. Blockchain is an immutable database, shared across all participants, that stores the history of communications. Incorporating blockchain in VPP introduces a number of advantages which include:

  1. Decentralisation: Blockchain establishes a trusted network over untrusted participants without relying on trusted third party using distributed consensus algorithm.
  2. Security: All transactions are sealed using asymmetric encryption and contain the hash of the transaction content which in turn ensure data confidentiality and integrity
  3. Anonymity: The assets are known by a digital identity which introduces anonymity and trust for activities between VPP members.
  4. Auditability: the transactions are stored in a distributed ledger permanently that facilitates auditability.

Built upon blockchain technology, a flexible VPP provides visibility to behind-the-meter resources that empower operators to plan, procure, and deploy behind-the-meter flexibility to provide services to network operators. The blockchain-enabled platform provides a trustless, self-audited proof-origin for green energy generation and consumption which accelerates the transition to the decarbonization of the energy sector. The visibility over behind-the-meter resources empowers customers with any source of energy flexibility -even those without battery storage- to be part of the VPP. Besides, the blockchain-enabled VPP would be able to provide services to both wholesale energy markets and distribution grid operators.

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About the author:

Dr. Mohsen Khorasany is a Senior Research Engineer at TYMLEZ. He is an experienced researcher with over 10 years of experience in the energy sector, including market design for distributed energy resources, local energy markets, and energy pricing mechanisms. Currently, he works with TYMLEZ on developing innovative solutions to facilitate decarbonisation and decentralisation of the energy sector. TYMLEZ is an ASX listed software solutions provider leveraging blockchain technology to deliver leading-edge enterprise grade green energy and sustainability applications to the Australian market.

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