Virtual Power Plants Aren’t Just Virtual — They’re Real

As Japan starts rebuilding after this month’s devastating earthquake and tsunami, it must do so with a significant shortfall of electricity. With almost four percent of the country’s baseload capacity offline due to the crisis at the Fukushima Daiichi nuclear plant and problems at other generation facilities, rolling blackouts are common around Tokyo, hampering the country’s manufacturing sector.

In order to make up for the shortfall in electricity, Japan must increase generation from coal, oil and natural gas plants. The country theoretically has enough capacity to make up for the offline nuclear plants, but the economic toll could be substantial: According to Platts, Japan may need to increase crude oil imports by 67,000 barrels per day, coal imports by 16,000 metric tons per day and liquified natural gas imports by 16,400 metric tons per day.

Increasing fossil energy imports will not only add billions of dollars to the reconstruction effort, but may require Japan to purchase more carbon offsets in order to meet its greenhouse gas reduction efforts under the Kyoto Protocol.

Is there a better way to make up for such a drastic loss in generation without increasing expensive, dirty energy imports?

Some experts believe the answer lies not in increasing the number of centralized power plants, but in creating “virtual” power plants that quickly adapt to changing energy needs.

A virtual power plant (VPP) is one of the main functions of the smart grid. A VPP matches up a variety of distributed energy systems with intelligent demand response capabilities and aggregates those resources into an asset that acts like a centralized power plant. VPPs are similar to microgrids; but while microgrids are very local in scope, VPPs can theoretically be deployed on a GW-scale at the utility level.

“I would not be surprised if utilities [in Japan] put an increased focus on this concept moving ahead,” says Kurt Yeager, executive director of the Galvin Electricity Initiative, a leading smart grid think tank. “They’re already more digitally advanced. They have the foundation to deploy this concept.”

Rudimentary forms of VPPs have been in service for decades. Traditional demand response – when a utility or outside service provider aggregates load reduction at customer sites during peak demand – is the most basic form of VPP. On the supply side, power companies in Europe have experimented with aggregating wind, combined-heat-and-power and small hydro sites together as well. But the highly-intelligent mixed-asset VPP, in which both demand-side and supply-side resources are brought together by information technologies, is still evolving.

“It really is a variety of [system] sizes and technologies – and that’s what makes it so complicated, and from my perspective, so fun,” says John Simmins, program manager for smart grid projects at the Electric Power Research Institute.

With better distribution management software that helps operators visualize what’s happening on the grid, more sophisticated demand response capabilities and the proliferation of distributed renewables, the VPP is looking like a very realistic concept.

According to a recent report from Pike Research, the global mixed-asset VPP market will grow from 500 MW of capacity today to 1.5 GW by 2015. The entire VPP market, which includes strictly supply-side projects (i.e. a group of small plants for increased generation) and strictly demand-side projects (i.e. intelligent demand response to maximize efficiency), may grow to more than 41.5 GW by that date.

“The ultimate virtual power plant will be mixed asset…but for now, you see a combination of projects led by demand response,” says Peter Asmus, an analyst with Pike Research.

Current capabilities aren’t enough to make up for a multi-GW shortfall of electricity like the one in Japan. But the concept has been deployed on a large enough scale to demonstrate its feasibility.

The largest mixed-asset VPP in the world is in Germany. Called the Regenerative Combined Power Plant, it blends together three wind farms totaling 12.6 MW, 20 solar PV plants worth 5.5 MW, four biogas systems equaling 4 MW and a pumped storage system with 8.4 GWh of storage. The projects are combined and monitored through an intelligent controlling system that allows operators to quickly adapt to changing power needs. (Note: For an informational video on how the Combined Power Plant works, watch the video posted at the bottom of this story.)

According to the developers of the project – SolarWorld, Enercon and Schmack Biogas – the Combined Power Plant theoretically proves that Germany can meet 100 percent of its electricity needs from renewable resources and demand response, thus phasing out the need for nuclear and coal.

But the true cost of scaling to that size is still unknown, says Pike’s Asmus. Even so, he says projects like the one in Germany are “the next, natural way to go.”

Another major project in Germany, developed by Siemens and the utility RWE Energy, blended nine hydro facilities together into an 8.6 MW power plant controlled by a sophisticated communications system that monitors electricity prices and system demand.

According to Roberta Bigliani, a research director for IDC Energy Insights, this project also proved the viability of aggregating distributed resources to look like centralized facilities.

“The information-communications technologies are the core of the virtual power plant,” says Bigliani. “They are becoming better and are able to manage more facilities. So it is coming together.”

The U.S. is also making headway in combining demand-side controls with distributed resources.

In February, the leading demand-response provider EnerNOC announced it will work with the Northwest power marketing agency Bonneville Power Administration (BPA) to provide services to match fluctuating electricity output from some wind farms in its territory.

EnerNOC will work with customers in BPA’s territory to either reduce or increase demand depending on the amount of wind delivered to the grid. EnerNOC’s President and Co-founder David Brewster calls the service “demand response 2.0.”

“This can serve as a dancing partner for wind,” says Brewster. “We want to get as much wind on the system as possible – demand response can increase that penetration.”

The common perception is that wind and solar require expensive grid storage technologies or equivalent amounts of natural gas back-up in order to reach high penetrations. Brewster says that with demand response capabilities, that need is reduced or, in some cases, eliminated all together.

The EnerNOC-BPA project is small – as are the others forming around the country. But John Simmins of EPRI, who has been helping guide the development of a few VPP pilot projects, says experience in the U.S. and in Europe proves the concept is “very possible” on a large scale.

Kurt Yeager of the Galvin Electricity Initiative agrees. He says the situation in Japan – and the decisions of some European countries to phase out nuclear power – may act as a catalyst for deploying more VPPs and other smart-grid concepts. But he also sees nuclear as an important part of the clean energy picture.

“The knee-jerk reaction from this may be to get rid of nuclear power. If that’s the case, we’ll have to look elsewhere – and if you want to do it without spending too much money on centralized infrastructure, this could one answer along with modernizing nuclear power standards and technology.”

To hear interviews with various experts on virtual power plants, listen to this week’s Inside Renewable Energy podcast linked above.

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  • I am a reporter with, a blog published by the Center for American Progress. I am former editor and producer for, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep in touch through twitter! My profile name is: Stphn_Lacey

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I am a reporter with, a blog published by the Center for American Progress. I am former editor and producer for, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep in touch through twitter! My profile name is: Stphn_Lacey

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