Virtual Power Plants Deliver Operational Benefits

by Anthony Brough, Energy Consultant Services LLC

Efficiently meeting energy customers’ needs gets increasingly complex. Smart grid technologies such as advanced metering infrastructure (AMI) and the associated software systems present promising benefits: gathering critical usage data more effectively, allowing remote turn-on and turn-off, and improving outage management and power quality. Other technologies are equally critical in the utility ecosystem, however.

Utility Ecosystem Grows More Complex

U.S. utilities of all sizes and regulatory influence are experimenting with or rolling out new, nontraditional energy sources. Renewable sources are the most well-known: wind turbines, biofuel generators and solar. Beyond the environmental benefits of these sources, however, significant challenges include:

  • Matching generation capability when demand is needed,
  • Overcoming higher capital investment costs,
  • Delivering power from remote generation sources, and
  • Managing legislative and regulatory expectations.

Beyond the introduction of a renewable source to the utility ecosystem, utilities increasingly are implementing other nontraditional sources such as demand response, customer-distributed generation and localized voltage control. The utility ecosystem is crowded with new energy sources to meet customer demand. In addition, traditional energy sources such as legacy power plants (coal, gas and nuclear) demand constant attention and management in their dominate role in this ecosystem.

On top of those challenges, a utility could add available market power, capacity payments and contractual commitments to independent power producers), creating an extremely complex management problem.

Given regulatory requirements, system limitations, equipment operational boundary conditions, market pricing fluctuations and the other challenges new energy source options present, how might a utility ensure customers receive the lowest-cost energy? Furthermore, utility executives must ensure shareholder value is maximized at the same time.

Balancing these options is spread across multiple utility departments using blunt, independent tools, which could include hundreds of spreadsheets and a mix of automated and manual data manipulation. The result often is a suboptimal set of solutions.

Comprehensive, Automated Tools Needed

Software tools can support ecosystem management, but no software developments can gather information from all elements, forecast demand and market pricing, balance legacy system capacity and leverage new, nontraditional energy sources. Given the variables and mandatory limits, optimization of this system is beyond the capacity of the traditional toolset.

A toolset is needed that centrally can:

  • Gather day-ahead market pricing,
  • Evaluate demand and supply impact resulting from weather and other influencing factors,
  • Understand regulatory-mandated operational requirements and manage their compliance,
  • Understand legacy generation operational costs and maintenance requirements,
  • Understand availability of nontraditional resources, and
  • Gather fuel cost data and forecast the system impact.

The objective of this toolset would be to gather and evaluate all of these variables, forecast trends, develop generation source scenarios and provide utility managers with optimized solutions for implementation.

Virtual Power Plants

A virtual power plant (VPP) can evaluate all of these options and provide timely recommendations that can be acted upon. Virtual power plants bring:

  • Added value without investment in new generation plants,
  • Added value from coordinating previously uncoordinated traditional and nontraditional generation sources,
  • Access to new markets (minutes reserve and spot markets) without owning large plants, and
  • Improved system reliability and cost efficiencies through a balanced mix of renewable and nonrenewable sources.

The proposed VPP toolset allows control technology use to connect and balance disperse energy sources and consumer demand. VPPs then optimize deployment for reduced consumer costs and increased shareholder value. Local optimization can be deployed on a single plant. Only through an integrated ecosystem, however, can the envisioned VPP deliver these benefits.

The formation and integration of this VPP requires an established information technology environment and must be capable of capturing the rules, regulations and technical know-how within a complex utility ecosystem. While North American utilities struggle to deal with this increasing complex ecosystem efficiently, these tools have been applied in Europe. E.ON, one of the world’s largest privately owned power groups, relies on an end-to-end solution for the control of every power distribution point on its Italian network provided by Kisters. The system provides real-time management of data related to consumption, billing and supply.

The first phase of the project was the deployment of an energy data management system and forecasting module that manages all customer data, consumption curves and readings, and facilitates the preparation of data required for the invoicing system. The same tool generates a forecast of customers’ consumption based on historic data. The second phase included the deployment of a portfolio management module. This module interfaces on one side with the pricing system for the management of offers to the end customers and on the other side with the data management system for updated consumption and forecast data. Use of these toolsets has proven successful for E.ON in providing clear, daily action plans in a complex utility environment where multiple generation sources and system requirements must be met.

Pursuing the VPP

Utilities face overwhelming challenges: embracing new technologies, responding to regulatory and legislative demands, improving customer service, managing a diverse set of generation and fuel options, and satisfying shareholders.

Until utilities embrace deployment of system optimization tools, however, achieving the full value of smart grid technologies and nontraditional generation sources such as renewable energy (e.g., wind and solar), demand response, customer-owned generation and voltage control will not be possible.

Anthony Brough is Energy Consultant Services LLC “Ëœs principal consultant. Energy Consultant Services LLC is an independent firm that consults for energy product and service providers, including Kisters North America.

Utility Ecosystem:

An ecosystem where traditional and nontraditional generation and distribution assets, power and fuel markets, and energy consumers thrive in an efficient, mutually beneficial way.

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  • The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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